“Super stapling” came into effect on 1 November 2021, so all Australian business owners need to understand their obligations.
From now on employers will need to change their super and payroll processes for incoming employees to comply with ‘super stapling’ requirements.
What is super stapling?
According to the ATO, Australians spend an estimated $450 million maintaining 6 million unintended multiple super accounts.
‘Super stapling’ is one of the reforms to Australia’s superannuation system announced as part of the 2020 Federal Budget. The changes aim to solve the problem of unintended and unknown multiple accounts that erode Australian’s retirement savings.
Rob Dunn, Managing Director of Benefits & Payments at people management platform, Employment Hero, said, “Employees starting a new job should advise you, their employer, on which super fund they’d like their super paid into. The official term for this is ‘choice of fund.’ Where a choice was not made by an employee, you could ‘default’ them into your company-nominated fund.
“However, as of 1 November, ‘defaulting’ an employee into your company-nominated fund is no longer allowed without first checking if your employee already has an existing super fund. Essentially, if an employee doesn’t nominate a super fund themselves, the onus is on you, the employer, to search for your new employee’s existing ‘stapled’ super fund via the ATO.
“A stapled super fund is an existing super account that is linked or ‘stapled’ to an individual employee and follows them no matter what job or role they move to.”
What businesses need to be aware of
Previously, a commencing employee who did nominate a super fund had their super contributions paid to a default ‘MySuper’ product selected by their employer.
Under the new system, when an employee commences and does not nominate a super fund, employers will be required to contribute to the employee’s stapled fund to meet their Superannuation Guarantee (SG) obligations.
If no super account is specified, the employer is responsible for checking if the employee has an existing stapled super fund. This process can be done by logging into ATO online services and providing the incoming employee information.
“If an employee’s existing fund is found via the ATO, you must use this for super payments, not your company-nominated fund. If your new employee does not have a ‘stapled’ account, nor specifies a ‘choice of fund’ which account they’d like to use, you are permitted to set up an account for them with your business’ nominated super fund”, Mr Dunn said.
If SG obligations are not met, employers risk paying additional penalties or charges on top of the SG charge.
The new system adds a step to businesses onboarding procedures. Employers now have to proactively ensure they are maintaining their legal responsibilities in regards to employee super.
Mr Dunn said, “The main consideration here is that previously there was a one-step process for you as an employer in the case an employee didn’t nominate a super fund from the commencement of employment. You’d simply ‘default’ them into your company-nominated fund. There is now an additional step required from you in that you must proactively search yourself to find if an employee has an existing ‘stapled’ account.”
However, the ATO has simplified the process if more than 100 staff required onboarding.
“A bulk request can be completed to request stapled super funds if you have over 100 employees starting. For anything less than 100, employers will need to individually request these super details, increasing the time it takes to onboard new team members,” Mr Dunn continued.
“The employment landscape is constantly changing and the shift from analogue to digital HR and payroll management is accelerating. New digital solutions available to employers make it easier to keep up to date with ever-changing rules around employment.”
The new legislation is intended to save Australian employees money by avoiding additional fund fees. Despite the added responsibility on employers, Mr Dunn believes super stabling to be a positive move.
He said, “The intent of the Your Future, Your Super (YFYS) stapling measures is great as it looks to ensure that employees don’t accidentally end up paying for multiple super funds, resulting in duplicate fees that can quickly erode their super balance. It stops the unintended creation of new super funds because an individual hasn’t let their employer know which fund they want to use.”