Employer Action Code: Act
Parliament has passed the Your Future, Your Super Bill, which aims to improve superannuation efficiency and performance for members. Measures include a performance test for superannuation products and the “stapling” of employees’ superannuation accounts to individuals as they move between jobs. Royal Assent was received on June 22, and implementation regulations are expected in the coming months.
Key details
- Performance test: From July 1, 2021, the Australian Prudential Regulation Authority will evaluate the investment performance of MySuper default superannuation products annually. Products that underperform their net investment return benchmark by 0.5 percentage points per year over an eight-year period will be classified as underperforming and will be required to inform fund members of this by the following October 1. Funds that fail two consecutive annual performance tests will be banned from accepting new members until their performance improves. The performance test will be extended to many other products by July 2022.
- Stapling of superannuation accounts: From November 1, 2021, if an employee with an existing fund does not nominate a fund to receive superannuation contributions at the start of a new job, the employer will pay the contributions to that existing fund (rather than to the employer’s nominated default fund). Employees new to the workforce who do not have an account in a superannuation fund and fail to select a fund will have their employer contributions paid into the employer’s default fund.
- Separate measures: Parliament also recently passed measures that enable individuals ages 65 and 66 to make up to three years of non-concessional superannuation contributions and increase the maximum number of allowable members from four to six in self-managed superannuation funds.
As a reminder, the minimum superannuation guarantee contribution rate will increase to 10.0% (from 9.5%) on July 1, 2021, as scheduled, despite earlier indications that it might be postponed.
Employer implications
The importance of employers continuing to review their default superannuation funds is now heightened by the significant consequences if the performance test is not passed. While the stapling measure is intended to increase the efficiency of the superannuation system overall by reducing costs associated with members having multiple small-balance accounts, employers will need to consider and prepare for the measure’s potentially significant impacts on the administration and design of their superannuation and insurance arrangements. Australian employers have traditionally relied on employees having insurance cover within their superannuation fund, so there is an increased risk of employees being stapled to a fund that doesn’t insure or provide appropriate cover (for further details, see What would 'stapling' mean for your business).
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