A number of changes are being implemented that will affect who is required to be paid superannuation, the Super Guarantee (SG) rate and who needs to meet the work test for voluntary contributions. For individuals working casually or working part-time across multiple jobs, they currently may not receive any superannuation contributions at all from employment.

What is changing?

Currently employers are not required to make superannuation contributions under the superannuation guarantee legislation for employees in receipt of salary and wages of less than $450 in any calendar month.  

From 1 July 2022, the $450 Super Guarantee (SG) threshold will be removed.

Superannuation support must be provided to employees regardless of the level of income they receive in any one month.

Who is excluded from the changes?

Contributions are not required for employees under age 18 who work less than 30 hours per week, regardless of their monthly income, unless they are covered by a workplace agreement that states otherwise. 

There is no change for minors from 1 July 2022.

What should employers do prior to 30 June 2022?

Most payroll procedures and systems are currently configured to exclude superannuation payments for those who earn less than $450 per month.

• Employers should ensure their processes and reporting are robust and capable of meeting Superannuation Guarantee (SG) obligations from the first SG payment cycle after 1 July 2022.

• Employers will need to work with their payroll software provider to update their systems for the changes to ensure they do not inadvertently underpay employee superannuation entitlements from 1 July 2022.

• Employers should ensure that details of each employee’s fund of choice is documented and recorded in the payroll system.

• Ensure you are also able to request stapled super fund details from the ATO. Check and update your access levels of your authorised representatives in your ATO online service (Business Portal). This will ensure you can request employee’s ‘stapled super fund’ details from the ATO.

Other superannuation changes

SG rate

With effect from 1 July 2022, the SG rate will rise to 10.5%.

The SG rate is legislated to continue to increase as follows:

To avoid any negative impact to employees, complete salary reviews before 30 June 2022. Provided the business can support the cost and cashflow, this will ensure the pay increments at least cover the hit to the employee’s cash salary component.

Employees who are packaged on a gross salary plus super arrangement will have no impact on their cash salary, although employers need to factor in the additional wages cost for the superannuation increment of 0.5%. This will mean the total wages costs will increase for other on-costs such as payroll tax and WorkCover.

Removing the work test

The work test will be removed for those aged 67 to 74 for voluntary (member) contributions.

From July 1 2022, individuals aged 67 to 74 will no longer have to meet the work test to make member non-concessional contributions (NCC).

If an individual wants to make a member taxable contribution for those aged 67 to 74, they will need to continue to meet the work test. The work test is working 40 hours for remuneration over a 30-day period, at least once during the year.

What are the penalties for underpaying employees?

An employer who has underpaid the superannuation guarantee for a quarter will be liable for a superannuation guarantee charge (SGC) amount (i.e., the shortfall amount, nominal interest and an administration charge). The ATO can also assess a penalty amount of up to 200% of the SGC.

If there is a possibility that the SG has been underpaid or late payments made, employers should seek to undertake a review and lodge superannuation guarantee charge statements (if necessary) to avoid the possibility of excessive penalties.

How can SW help

• SW has an experienced outsourcing team to assist with your payroll function. We assist employers in understanding and becoming familiar with the new requirements to make this change as easy as possible, while also ensuring employers are meeting compliance requirements
• Our efficient teams are able to quickly review and lodge superannuation guarantee charge statements
• As a registered tax agent, SW can request the stapled super fund details for employees on your behalf
• Our teams regularly assist employers in budgeting for these increases

Contributors

Janelle McPhee

The post Don’t get caught out by upcoming superannuation changes appeared first on SW Accountants & Advisors.

What is Super Stapling?

Currently, where an employee does not nominate a complying superannuation fund, the employer is required to provide the minimum superannuation contributions, currently 10% of ordinary time earnings, to their default superannuation fund.

In the 2020-2021 Federal Budget, the Government announced the Super Reforms – Your Future, Your Super measure. 

One of the key elements is the super stapling. 

A stapled super fund is an existing superannuation account which is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs.

If a fund is recorded, then employers must send contributions to the fund for an employee, unless the employee requests for a change.

Employers will be obligated to search for their new employees’ existing fund and a new account can only be created with the employer’s default fund once it is confirmed by the ATO that it cannot identify a stapled fund for the employee.

Employers may also need to request the employees’ stapled super fund details if they are either:

• Temporary residents
• Covered by an enterprise agreement or workplace determination made before 1 January 2021.

Employees will be able to see details of their stapled super fund via their personal MyGov account (as long as it is linked to the ATO portal).

When does it come into effect?

Super stapling will come into effect from 1 November 2021. 

It is still mandatory for employers to provide employees with a Standard Choice of Fund form. 

Employers need to record when it provides the form and when it collects a completed form from the employee. Where an employer has nominated the default superannuation fund, it can still provide details of that Fund in Part B of the form.

If the employer does not meet choice of super fund obligations, additional penalties may apply. In the first 12 months, the ATO has indicated it may apply some leniency with penalties for non-compliance with the ‘stapled’ fund rules unless there is evidence that the employer did not make reasonable attempts to comply with the ‘stapled’ fund rules. 

Why the change?

This measure aims to reduce employees accumulating multiple super accounts after moving from one job to another throughout their working life.

Having more than one super account can be costly as it can means employees are paying multiple sets of fees and insurance premiums.

Stapling should also make it easier for employees to keep track of their super savings.

Do employers still need to have their own default or preferred funds?

The answer is yes. 

If a new employee is not already a member of a superannuation fund, then the employer is generally required to offer them a choice of fund. If the employee does not choose a fund, the employer will nominate the company’s default fund, which will then become their stapled fund.

Will existing employees be affected?

Existing employees are not expected to be affected by these changes. 

Employers will continue to make their compulsory SG payments to the same super fund account they do today.

Do these new rules apply to contractors?

The answer is yes. 

The rules will apply equally to a person who works under a contract that is wholly or principally for the supply of their labour. In this case, the person is considered and treated like an employee under the SG regime.

How employers can prepare prior to 1 November 2021?

• Ensure you are able to request stapled super fund details from the ATO. Check and update your access levels of your authorised representatives in your ATO online service (Business Portal). This will ensure employers can request the new employee’s ‘stapled super fund’ details from the Australian Taxation Office (ATO) during the onboarding procedure.
• Review onboarding forms to capture a new employees ‘stapled super fund’ account details.
• Review and amend employment contracts if required. For new employees commencing on or after 1 November 2021, current superannuation clauses will need to be updated to refer to the possibility of contributions being made into an employee’s stapled fund.
• Consider how super stapling may impact participation agreements with default funds. For example, where the default fund offers fee discounts or tailored pricing which is conditional upon a certain percentage of employees being in the default fund, such arrangements could be adversely impacted by super stapling.

What employers need to do from 1 November 2021 ?

1. If your new employee has chosen their super fund, you will need to pay into their chosen fund. 
2. If your employee has not chosen their super fund, you will need to obtain the stapled super fund details from the ATO. The stapled super fund details can only be requested after you have submitted a tax file number (TFN) declaration or Single Touch Payroll pay event linking your new employee to your business. There is no limit to the number of requests you can make. To request a stapled super fund, you or your business authorised representative need to log in to the ATO online services portal and provide the employee’s details (including their TFN, full name, date of birth and address). You should be notified of the result within minutes and will be sent to the authorised representative.
   Employers can make a bulk request if you are onboarding more than 100 new employees at once. A bulk request form will be made available in excel format for download from 1 November 2021.

   ATO will notify your employee of the stapled super fund details they have provided to you.

   If an employee has more than one fund, they will be automatically stapled to the one that has been active (received a contribution) most recently. Where there is more than one active fund rules will be applied to select the most appropriate fund, for example, the fund with the biggest balance.

3. If the stapled super fund account provided by the ATO cannot accept contributions for the employee, you will need to make another request via the ATO online services portal.
4. If the same stapled super fund account is returned, you will need to contact ATO to obtain an alternative stapled super fund account. If there is no alternative fund, the ATO will advise whether the contributions can be made to the employer’s default superannuation fund or another fund that meets the choice of fund rules.

How SW can help

• SW has an outsourcing team to assist with your payroll function. We can assist employers understand and become familiar with the new requirements to make this change as easy as possible.
• Review your onboarding process and provide advice around current procedures used to obtain super account details and recommend possibly a more efficient onboarding procedure.
• We are a registered tax agent and can request the stapled super fund details for employees for you.

Get in touch 

Sharon Burke

E sburke@sw-au.com

Janelle McPhee

E jmchpee@sw-au.com

Joshua Teo

E jteo@sw-au.com

Legal expert

Alison Baker 

E alison.baker@hallandwilcox.com.au

The post Superannuation Reform appeared first on SW Accountants & Advisors.