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There are some proposed reforms coming to super in July 2021. See what they may mean for you.
The amount of super businesses are obliged to pay eligible workers is legislated to increase on 1 July 2021, along with an number of other proposed reforms announced in the 2020-21 Federal Budget under the Australian Government’s Your Future, Your Super package.
The proposed reforms aim to make it easier for employees to keep track of their retirement savings, take their super fund with them when they change jobs, and help them compare the performance and costs of different super funds.1 However, these changes had not been passed by Parliament at the time of writing of this article and may not become law.
These are the five main proposed changes to super your business needs to know about for 2021.
The Superannuation Guarantee (SG) is the minimum amount that a business must pay into an employee’s super fund. It is currently 9.5% of gross salary.2
The SG is currently legislated to increase to 10% from 1 July 2021 and rise 0.5% a year until it reaches 12% in 2025.
SG scheduled rate rises
The SG is scheduled to rise by 0.50% each financial year as follows:
Source: Australian Taxation Office, 22 July 2020, Super Guarantee Percentage
There are a couple of things businesses can do now, to make sure they’re ready for the SG rate increase on 1 July 2021:
QSuper has some information you can share with your staff. Just contact a member of our Employer Solution and Support team. Otherwise, if you have a different default superannuation fund, they should be able to provide this to you.
Currently, when an employee changes jobs, their superannuation account does not automatically follow them, but under the proposed reforms, this will change from 1 July 2021.
Under the proposal the Government intends for members to keep their current super fund when they change jobs.
It means that businesses will need to pay super into their employees’ existing superannuation fund (if they have one), unless they select another fund. This is only applicable to new employees joining your organisation and is what the government is referring to as ‘stapling’.
While some people may intentionally have more than one super account, many people may have more than one super account without knowing. Stapling aims to reduce unintended multiple accounts.
The benefits of consolidating super into one account can include:
Selecting a well-performing superannuation product rather than an underperforming one could significantly boost the retirement income of your employees.
To make it easier to compare their options it is proposed that your employees will have access to a new, interactive, online YourSuper comparison tool to help them decide which super product best meets their needs.
The YourSuper comparison tool will provide a standardised comparison of MySuper products. It will also show which Australian Prudential Regulation Authority-regulated products a person has and allow any one of them to be included in a comparison.
According to the Australian Government, the comparison tool:
Another of the 2021 super reforms proposed to come into effect on 1 July 2021 is putting an onus on super fund administrators to provide more details about their investment decisions and to demonstrate how those decisions are in the best financial interests of members.
The super trustees will be required to:
Under the reforms, MySuper products will be subject to an annual performance test by July 2021. The test will be based on a comparison to a benchmark set by the regulator.
If a fund is found to be underperforming, it will need to inform its members by 1 October 2021.
Underperforming funds will be listed as underperforming on the YourSuper comparison tool until their performance improves.
Funds that fail two consecutive annual underperformance tests will not be permitted to accept new members and won’t be able to reopen to new members unless their performance improves.
The testing regime is set to begin with MySuper products from 1 July 2021 and expand to all super products from July 2022.
Contact our Employer Solutions team
1. Australian Treasury, 6 October 2020, Your Future, Your Super Factsheet, accessed 11 February 2021 at treasury.gov.au
2. If you earn $450 or more (before-tax) in a calendar month, your employer must pay super guarantee (SG) on top of your wage or salary. The standard SG rate is 9.5% of your ordinary time earnings (OTE) salary. Ordinary time earnings (OTE) salary is generally what you earn for your ordinary hours of work, including commissions, shift loadings and allowances, but not overtime payments. For more information, see ato.gov.au/super
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