Four recent super changes for employers
Here’s what the changes mean for your business.
It’s been a challenging time for business lately and a lot has changed in super too. We've seen the federal government’s major Your Future, Your Super (YFYS) reforms introduced along with an increase to the superannuation guarantee (SG) rate and the final rollout of the Single Touch Payroll program.
While these changes are generally positive for workers and will help make the super system more efficient, they’ve also created some new actions for employers. As a leading Industry SuperFund for small and medium businesses, our priority is to make super as easy and simple as possible for you.
Here’s a snapshot of this year’s changes and what they could mean for your business and how we can help.
1. The amount of super you need to pay your staff increased
On 1 July 2021, the compulsory superannuation guarantee (SG) rate increased from 9.5% to 10%. This is the first in a series of slated increases that will see the rate rise by 0.5% every year until it reaches 12% by 2025.
What does this mean for you? It depends on how you package your salaries. For example, if you pay a base salary plus super, then your employees’ take-home pay will stay the same and their super payments will increase. If you pay a package including super, then your employees’ take-home pay may need to decrease for you to pay the extra super, or future pay increases might need to be offset. For your more senior employees, you might also need to factor in that the concessional contribution cap was also raised from $25,000 per annum to $27,500. This change may also mean that you should have recalculated package arrangements at certain levels.
Need help navigating the changes? We can provide one-on-one support to help you manage your payments and make super as effective as possible for employees, as well as workplace seminars for your team about super principles, the contribution strategies and other financial wellbeing topics. Contact us for a confidential chat to get started.
2. Single Touch Payroll now applies to most businesses
From 1 July 2021, Single Touch Payroll (STP) now applies to most businesses, including those with 19 or fewer team members and those with closely held employees (e.g. directors of family companies).
STP was introduced by the government in 2018 to streamline employers’ reporting obligations. Using STP enabled software, you provide information such as your employees’ salaries, super and tax at the same time as you process your payroll.
If you haven't started reporting through STP, you need to start as soon as possible to avoid penalties that may apply. Reach out to one of our Relationship Managers if you need any assistance or visit the ATO website for more information.
3. Your default super fund will be subject to an annual performance test
Introduced as part of the YFYS reforms, from 1 July 2021 super funds will need to meet an annual performance test. Failing in any year will require the fund to write to members in underperforming investment options advising them that they should consider moving. If the fund fails two consecutive tests, it won’t be allowed to accept new members until its performance improves.
This means that if your default fund is an underperformer, you may want to consider the reputational risks of this and in the second year, you won’t be able to provide it as an option for new employees to join.
You can check the performance of your default fund by using YourSuper, a new, interactive online comparison tool that enables users to rank super funds by fees and investment returns as well as fund name.
4. Your new employees will be ‘stapled’ to their existing super funds
Also part of the YFYS reforms, from 1 November 2021, when a new employee joins your business, if they have not nominated a chosen fund, you’ll need to pay super into their stapled fund. You’ll be able to find out their stapled fund from the Australian Taxation Office.
This is a well-intentioned initiative designed to reduce duplicate accounts in the super system, saving people multiple fees. However, it’s important for workers to make sure they’re happy with their fund over time. A lot can change since their first casual job! Different funds also offer different levels of insurance that might not suit a worker over their entire career.
How can you help your team select a super fund that fits their needs? A great start is to offer the option of a default super fund, which they can select through the Choice of Fund process, with superior long-term returns and insurance designed for their occupational category.
As one of Australia’s top-performing Industry SuperFunds over the last 20 years*, CareSuper is committed to protecting our members’ money from market volatility while actively seeking the best investment opportunities in Australia and overseas.
Our track record of outperformance, combined with our commitment to providing quality tailored service for our members and employers, is why we’re the chosen super partner for more than 55,000 Australian businesses.
To find out more about the YFYS changes and how we can offer support, head to our YFYS hub and FAQs for employers.
If you’re an employer and want to hear more from us, fill in your details and we’ll be in touch.
* SuperRatings Fund Crediting Rate survey SR50 Balanced (60-76) Index – June 2021.
Past performance is not a reliable indicator of future performance and you should consider other factors before choosing a fund or changing your investments.