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Your Super, Your Future, Your Role

This significant piece of legislation passed Parliament on in June 2021. It contains some of the most pro-member reforms in many years, and has implications for clients and the many bookkeepers who handle client superannuation.

Stapled Super Fund Rules

Under the new stapling rules, from 1 November 2021 when an employee changes jobs, the super fund that they used with their former employer will be ‘stapled’ automatically to them – instead of the new employer paying their super into a default fund. This is aimed preventing employees from having multiple accounts which, over the years, have the effect of reducing their retirement savings through fees and charges.  

An employer will comply with the Choice of Super Fund rules by making contributions to the stapled fund of an employee who:

• started their employment on or after 1 November 2021
• has a stapled super fund, and
• has not chosen another fund to receive superannuation contributions into.

In the event where an employee does not have a stapled fund and does not nominate their own fund, employers can continue to make contributions to their own default fund.

To support the new rules, the legislation enables employers of new employees to request from the ATO any stapled fund held by the employee. Where a valid request is made in the approved form, the Commissioner must notify the employer as soon as practicable about whether a stapled fund exists for that employee and, if so, what it is.

You’ll be able to request an employee’s stapled super fund from the ATO after the employer (or their BAS Agent or Tax Agent on their behalf) has submitted a Tax file number declaration or Single Touch Payroll pay event linking the employer to them. There is no limit to the number of requests you can make. To request a stapled super fund, employers, or their authorised representative such as their BAS Agent, need to:

1. log into ATO online services.
2. enter the employee's details, including their:
• TFN – an exemption code can be entered where an employee cannot provide their TFN, but this could result in processing delays
• full name – including ‘other given name’ if known
• date of birth
• address (residential or postal), if TFN not given.

You will receive the response on-screen. You should be notified of the result of the stapled super fund request within minutes.

The ATO will notify the employee of the stapled super fund request. The employee is also informed about the stapled super fund details that have been provided.

To be clear, not complying with the stapled fund measures from the 1 November start date means that an employer is in breach of the choice of super fund rules. Specifically, under section 19(2A) of the SGAA (1992) an employer will have a Super Guarantee (SG) shortfall where it does not comply with the choice of fund requirements (i.e. a choice shortfall). This shortfall liability is 25% of the notional quarterly shortfall (10% of the employee’s total salary and wages up to the maximum contribution base in 2021–22), less any individual SG shortfall for the employee for that quarter. The choice shortfall however is limited to $500 per notice period for each employee. This $500 cap may be for either a particular quarter, or a notice period which can consist of multiple quarters.

New performance test

The new legislation helps ensure members’ retirement savings are protected from underperforming funds by subjecting MySuper products and other trustee-directed superannuation products to an annual, objective performance test based on net investment returns, with clear consequences for failing the test. Currently, underperforming funds are not held to account.

Super funds will now be required to notify their members if they fail to meet a net investment return benchmark by 0.5 of a percentage point a year over eight years. Funds that fail the test for two consecutive years will not be able to accept new members until their performance improves, or they merge.

If your product underperforms, you will be notified by your fund and encouraged to consider using the YourSuper comparison tool (see next section) to make a different choice of fund.

This is a welcome development because Treasury analysis of APRA data shows that many superannuation funds are consistently poor performers. This includes 21 out of 77 MySuper products that underperformed in relation to a performance benchmark developed by the Productivity Commission by more than 0.5 percentage points from 2014 to 2019. Importantly, those products:

• held over $100 billion in assets across 3 million accounts
• received over 330,000 new member accounts and over $10 billion in contributions in 2018-19 alone, and
• charged members $1.2 billion in fees annually.

The amendments relating to the new annual performance test (which will be conducted by APRA) apply in relation to MySuper products on and after 1 July 2021 and in relation to other classes of beneficial interest in a regulated superannuation fund specified in the regulations on and after 1 July 2022.

While this is a welcome measure and will provide consumers with greater insight into the performance of their super fund, the government has come under criticism that ‘choice’ products (in which about four million Australians have their super invested) are not subject the annual performance reviews from the start. Nonetheless, Treasury estimates that 90% of APRA-regulated funds for those in the accumulation phase will be subject to the test within a year.

Comparison tool

The government has developed a new interactive online ‘YourSuper’ comparison tool (with information gleaned from performance testing, above) which will compare the performance of superannuation funds, and in turn allow members to make better decisions about which MySuper fund manages their savings. For the first time, members are able to compare, and find a better deal if they so choose. The tool is live now!

This follows a finding by the Productivity Commission that “many Australians find superannuation complex and are disengaged from decisions about their retirement savings.” The new YourSuper comparison tool encourages engagement in the system by allowing members to easily compare the performance of their fund with others on the market.  According to the Productivity Commission, when superannuation products are easy to compare, people are more likely to become engaged with superannuation and choose the product that is right for them.

The YourSuper comparison tool is available on an interactive website designed to make it easy for members to choose a superannuation product based on fees and performance information.

For the first time, members can now compare the performance and fees of all MySuper products in a single place, based on independent and reliable information, with underperforming products clearly marked.

The comparison tool, which is now live and available here, will:

• Display a quarterly updated table of MySuper products ranked by fees and investment returns, with products that have not met the new higher performance standard clearly highlighted as underperforming
• Link you to the fund’s website when you select a product from the table of MySuper products.
• Show your current superannuation accounts and allow you to select one of your existing superannuation accounts
• Prompt you to consider consolidating accounts if you have more than one fund.

The YourSuper comparison tool is based on information that superannuation funds report to APRA and will be developed in consultation with the Treasury. The information about product performance will be updated quarterly to ensure people are making decisions using up-to-date data.

Summary – BAS Agents and Super

With the new legislation now on foot, it’s worth reminding ourselves that a registered BAS Agent should not provide recommendations or finance advice about super to an employer or an employee, unless they hold a license with the Australian Securities and Investments Commission (ASIC). Examples of this may include:

• Which super fund employees should choose
• Their level of super contributions
• Consolidating their super.

If an employee is seeking advice around comparing and choosing super funds, it is suggested they either contact a licensed financial advisor, visit the ASIC advice website www.moneysmart.gov.au , or contact ASIC directly on 1300 300 630.

In the super realm, BAS Agents can however can continue to provide services related to super guarantee, and super guarantee charge including:

• Services under the Superannuation Guarantee (Administration) Act 1992to the extent that they relate to a payroll function or payments to contractors.
• Advising about an SGC liability, including calculating the liability and preparing the SGC statement
• Advising about the offsetting of late payments of superannuation contributions against the SGC
• Completing the late payment offset election section of an SGC statement
• Representing a client in their dealings with the ATO relating to the SGC – lodging SGC statements, being an authorised contact relating to SG and SGC, and accessing these accounts in the ATO’s online services for BAS agents
• Being an authorised contact with the ATO for payment arrangements relating to SGC account
• Being an authorised contact with the ATO for requesting penalty remissions relating to SGC
• Being an authorised contact for any audit or review activity undertaken by the ATO relating to SGC.