Changes to Super in 2021

A raft of super changes are set to come into effect in 2021. During the course of 2020, we saw at one stage over 20,000 applicants per day accessing the early releaser super scheme under the federal government’s COVID-19 induced financial hardship provision.  For a sector usually defined by a ‘set and forget’ philosophy, we have now experienced what has been a game changer for the industry.

Never before have Australians been more interested in super.  The timing could not be more important as 2021 introduces four major changes that affect all, particularly employers.  The changes coming into effect were announced in the 2020-21 Federal budget as part of the ‘Your Future, Your Super’ package.

 

1. More super paid to employees

The Super Guarantee (SG) is scheduled to increase from 9.5% to 10% on the 1st of July 2021, however the Federal Government is yet to fully commit to this increase.  Mr Frydenberg has suggested that a decision will be made in the May 2021 Budget due to be delivered on the 11th of May.

The SG limit has been at 9.5% since 2014, despite originally scheduled to reach 12% by 1 July 2019.

A recent review into the Australian retirement income system found that the increases to the SG would lead to lower wage increases that would lead to having a negative impact on living standards for every day Australians. The review suggested there be alternative ways to improving Australians retirement outcomes.

 

2. Stapling – Your super will follow you when change jobs

This is one of the biggest changes to super affecting employers since the introduction of ‘Choice’ in 2005. According to the Treasury, from the 1st of July 2021, employees will automatically keep their super fund when they change jobs, ‘stapling’ the super account to your employee as they move from job to job.  This change is likely to affect your on boarding process.

How this impacts your new employee on-boarding 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.

The finer details are yet to be released and likely to be communicated post the budget announcement on the 11th of May 2021.

 

3. Contribution Cap Increase

Contribution cap limits are set to increase for the first time since 2017 due to Indexation.  This is a great initiative for those who are maximising their contributions to super.  The table below summarises the changes to these limits:

Contribution Cap

Current

From 1 July 2021

Concessional

$25,000

$27,500

Non-concessional (annual)

$100,000

$110,000

Non-concessional (Bring forward)

$300,000

$330,000

It is worth noting for those who triggered their bring-forward period in either the 2019/20 or 2020/21 tax year, they cannot take advantage of the higher non-concessional cap until their bring forward period expires.

 

4. Greater transparency on retirement savings and super fund performance

Another part of the 2021 super reforms includes a requirement for super fund administrators to provide more details on the decisions made to MySuper investment options, and how they work in the best financial interests of members.

Super fund trustees will be required to provide key information about how they manage and spend money prior to Annual General Meetings.

In addition to the above, superannuation products will face an annual performance test under the government’s reforms, the results of which will be made public on a government website. Funds that fail two tests consecutively will be blocked from accepting new members.

The move is designed to bolster the obligation that super fund trustee’s act in the best interest of their members, requiring funds to disclose how they are spending members’ money.

The testing regime is set to begin with MySuper products from July and expand to all super products from July 2022.

 

Have a question about the super changes? Get in touch to find out more on how we can help you and your people.

 

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