Preparing your business for upcoming changes to superannuation

Many of these changes are proposed to come into effect from 1 July 2021. To ensure you have time to prepare, we’ll keep you updated as they develop.

In the meantime, here’s a snapshot of the proposed key changes. 

1. A single super account to follow people when they move from job to job (known as stapling)

This is perhaps the biggest change for employers. It’s proposed that new employees will automatically keep their super fund when they change jobs. In effect, their super fund will be ‘stapled’ to them, following them from job to job, unless they explicitly choose another fund. This change will impact your onboarding process for new employees only.

How this impacts your new employee onboarding process

Where a new employee makes their choice of super fund:

• If a new employee notifies you of their preferred fund (using the Standard Choice Form), you must make payments into this account.

Where a new employee doesn’t make their choice of super fund:

• Where a new employee does not choose a super fund, you must contact the Australian Taxation Office (ATO) to see if the employee has an existing super fund – their ‘stapled’ fund. If they do, you must make payments to this account.
• If the new employee doesn’t have a stapled fund and doesn’t choose a fund, then you must create a new account with your nominated default super fund.

Existing employees aren’t expected to be affected by these changes. You must continue to make their compulsory SG payments into the same super fund account you do today. 

The government is expected to provide more information about how stapling will work in late April 2021. 

2. The scheduled increase to Super Guarantee (SG) contributions from 9.5% to 10% 

Compulsory employer SG payments are scheduled to increase from 9.5% to 10% on 1 July 2021.

How this impacts your SG obligations

When the compulsory SG contribution level is increased to 10%, you’ll need to adjust your payroll systems to pay the increased amount to your eligible employees. 

If you don’t pay the correct rate of SG into your employees’ super accounts by the quarterly due date, you may have to pay the Superannuation Guarantee Charge (SGC). This ATO penalty for late or inaccurate payment includes all the SG amounts owing to an employee, plus interest and an administration fee. You will also need to report and rectify any missed payments by lodging an SG Statement with the ATO. For more information about your SG obligations and quarterly due dates, visit the ATO website.

3. Contribution caps increasing

Contribution caps are set to increase for the first time since 2017 due to indexation. 

It’s also worth noting that anyone who triggered their bring-forward period in either the 2019/20 tax year or the 2020/21 tax year can’t take advantage of the higher non-concessional cap until their current bring-forward period expires. 

The transfer balance cap is also increasing with indexation, taking it to $1.7million. This means an individual can’t make any non-concessional contributions if their total superannuation balance is $1.7 million or more as at 30 June 2021. 

How to remain within contribution caps 

Employees are responsible for ensuring they don’t breach their overall contribution caps each year.

However, as an employer, the Federal Government also sets a maximum limit on an employee’s income on which you need to pay SG contributions – the maximum superannuation contribution base. The limit is indexed to AWOTE and changes every financial year. For 2021/22, the limit is $58,920 per quarter, so you only need to pay SG contributions on any amount an employee earns up to $58,920 per quarter for the 2021/22 financial year.

4. New electronic reporting payroll obligations

The Government introduced Single Touch Payroll (STP) in 2018 to reduce employers' reporting burdens. Using STP-enabled accounting or payroll software, like Xero or MYOB, employers can report all employee payroll information (salaries, PAYG withholding tax and super) directly to the ATO each time they are paid. 

Employers with more than 20 employees have been using STP since 1 July 2018, but from 1 July 2021, all employers will have to report payroll obligations electronically (unless they have an exemption). 

In a broader enhancement to STP, Phase 2 is due to roll out on 1 January 2022. The ATO is working with software providers to update all existing STP-enabled software so employers benefit from further streamlined reporting. Rather than reporting information about employees to multiple government agencies, the software will enable consolidated reporting, easing the administration burden.

How this impacts your payroll software

We recommend you speak to your existing software provider and/or check the ATO website for more information about the changes closer to the implementation date.