In November 2021 (yes that is next month!), the superannuation experience will be updated. Dare we say it will be an improvement for millions of Australians. “How?”, the cry goes up.
Super stapling is a government initiative that’s part of the broader Your Future Your Super (YFYS) reforms. It will alter the way that employers will onboard new employees. Setting up their super funds will change at this point. It will be introduced with the idea that it will solve the problem of employees holding more than one super accounts. Of course, with many accounts come the hefty fees that are levied. A staggering $30 billion is charged to Australian employees every year! The new system will mean that employees will instead hold a ‘stapled’ account. That account will stay with them as they change jobs. That means less account duplication, lower fees, and a positive impact on their super balance.
That means that employers will need to be aware what super stapling means for them. We are quickly heading toward the silly season so it makes sense to get to grips with that now instead of later. Here’s a run-down on what you need to know and how to get ready for the switch over.
So how do we do it now?
We would hope that any small business owner who pays staff knows how to set up and pay superannuation or super. It is Australia’s compulsory retirement savings program which you have no choice about paying or not. Until now, there have been one of two courses of action. Your new employee shares the details of their existing fund via the super choice form, or they decide to use the fund that you use for your business. From November, there will be a third step in this process. This will be known as ‘super stapling’.
What is super stapling?
It is quite straight forward, and this process has been well named. A stapled super fund is an existing super account which ‘stapled’ to an individual employee and follows them as they change jobs. The introduction of super stapling by the ATO means working Australians will be attached to one super fund for life. They can choose otherwise, but why would they? The new system has been created to lessen the number of super accounts people join throughout their working life. It will help them to get higher returns from a smaller number of accounts. That means higher retirement savings.
When does it start?
Super stapling begins on 1 November 2021. It will affect new employees who start either on or after that date. If they do not nominate a fund by completing a Superannuation Standard Choice form, employers will then have to search for the employee’s ‘stapled’ fund. They can do that using ATO services.
Tell me again why is this being introduced?
The current superannuation system has resulted in an estimated six million unintended multiple accounts. The result of that is the fees that result in a loss on members’ superannuation savings. This change in the way that Super funds are allocated and managed should minimise the chances of ending up with duplicate accounts. That means getting rid of the fees that come with them.
How do I find and use the stapled super information?
Super stapling will mean adding an extra step in your onboarding process. This will happen when you check for a new employees’ stapled account if they haven’t nominated their own.
- The ATO has created a directory to help with the tracing of accounts. You can access this information via ATO Online Services.
- After logging in, you’ll need to enter details such as an employees’ TFN, full name, date of birth and address. You will then be able to receive the details on their stapled fund.
- If the ATO search returns a stapled fund account for your new employee, you’ll need to set this up as normal within Xero. You can then go ahead and use it for their super guarantee and any salary sacrifice payments.
Do I need to make any other changes to my onboarding process?
Our advice is to check over your current onboarding processes. Make sure that you include the scenario where a new employee hasn’t completed a Superannuation Standard Choice form. You will need to have their details (including TFN) to find their stapled super account. Make sure that your current process gets you all the paperwork and information you need in time. Consider if this needs to be updated. If you are unsure, we can always look at your processes for you and advise what steps need to be taken. You can get in touch with us here if you would like to book a consultation with us.
What about my default fund?
Remember that this new system will only affect new employees. Any existing members of your team who already uses your default fund will not change. If the ATO advises that there is no stapled super fund for a new employee, you will be able to make contributions to your default super fund. This may be different where they fall under an EBA or award with a mandatory fund). This is more likely to be the case where someone has never had super before. Perhaps a young person entering the workforce or someone who has moved from overseas.
What are the other changes coming to superannuation I need to know about?
Super stapling is part of the broader Your Future Your Super reform. The whole process intends to improve the transparency, efficiency, and accountability of the industry as a whole. Once we have super stapling in place, some future changes will include:
- Super funds will be subject to an annual performance test by APRA and may be unable to accept new members if they fail
- The ATO will create a new interactive online YourSuper Comparison Tool. This will help consumers understand if their fund is underperforming
Where can I find more information?
The ATO has more details available on super stapling for employers. Keep an eye out for future updates from us too. At Keeping Numbers, we think it is important that you are kept up to date with any and all changes!
If you would like any help in understanding or implementing these changes you can email Liz Peacock and the team here. Or you can call Liz on 0405 801 119