Employers: Are you ready for the new ‘stapling of super’ rules?

Under the current super choice rules,  employers are required to offer eligible new employees a choice of superannuation fund in order to meet their superannuation obligations. If a new employee fails to nominate their preferred superannuation fund, an employer can comply with the choice of fund rules, by making superannuation guarantee (SG) contributions on behalf of that employee into the employer’s nominated superannuation fund (default fund) or a fund specified under a workplace determination or enterprise agreement.

However, from 1 November 2021, where no choice of a superannuation fund is made by a new employee, the employer must contact the ATO to enquire whether the new employee has an existing stapled fund.

If a stapled fund exists, the employer must make SG contributions into that employee’s stapled fund account as opposed to the employer’s default fund.

In the context of SG contributions made in accordance with a workplace determination or enterprise agreement, for employees starting employment on or after 1 November 2021, an employer cannot make contributions on behalf of the employee in accordance with a workplace determination or enterprise agreement made before 1 January 2021 and comply with the choice of fund rules unless the employer has requested and the ATO has advised that that there is no stapled fund for that particular new employee.

What is a stapled fund?

A stapled fund is an existing superannuation fund account which is linked (or ‘stapled’) to and follows the individual employee as they change jobs.

Will existing employees be affected?

The new choice of stapled fund rules apply in relation to an employee’s employment where that employment starts on or after 1 November 2021.

Arrangements for employees who are employed before 1 November 2021 are not affected by these rules, meaning employers are required to continue to make SG contributions into the same super fund accounts that they have been doing under existing arrangements.

What does an employer need to do from 1 November 2021?

Employers are still required to provide to a new employee the Superannuation Standard Choice form within 28 days of their employment start date.

Where a choice of fund has been made by the new employee, the employer must make SG contributions into their chosen fund.

If the new employee fails to make a choice, the employer must contact the ATO to ascertain whether the employee has a stapled fund. This can be done by logging into the ATO online services to request for the relevant employee’s stapled super fund details. According to the ATO factsheet Request stapled super fund details for employees such a request can only be undertaken after an employer has submitted a tax file number declaration for the relevant employee, or alternatively, a single touch payroll pay event is linked to such a request.

If the employer is advised by the ATO (via its online service) that the relevant employee has an existing stapled super fund, the employer must make SG contributions on behalf of that employee into their stapled fund account. Failure to do could cause the employer to be in a breach of the choice of fund law and may result in the employer incurring additional penalties.

Employers may only pay SG contributions on behalf of a new employee into their default fund only if the employee fails to make a choice and the ATO has advised that the employee does not have an existing stapled super fund.

Actions to be taken

In anticipation of the new choice of funds rules, employers should check and update access levels for personnel who may need to access ATO online services and request stapled super fund details. It may also be worth considering whether existing policies, procedures and systems be reviewed and updated so as to have them ready for the 1 November 2021 start date.

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.