Superannuation changes: What Australian employers need to know
Australian employers are required by law to make regular contributions to their employees’ superannuation. Superannuation rates are set to increase from 9.5% to 10% from 1st July 2021, which marks the first increase since 2013. This will be a progressive increase of 0.5% until July 2025. The rate will reach 12% by then. It is also being accompanied by amendments to the Treasury Laws Amendment ('Your Future, Your Super') Bill 2021 (the "Bill") which will have implications on the management of contributions made to the employee super funds.
This marks a time when employers can review or update their employee remuneration arrangements. For many employers, this 0.5% increase to the superannuation contribution rate will mean an increase in the overall remuneration paid to employees. It will impact people management strategy across Australia and hence remuneration structures of employees will need to be revisited. In the case of employers who give employees a fixed remuneration package that is declared to be "inclusive of superannuation", the superannuation contribution rate rise may not require an increase to the total package. But it may end up in a deduction in the base salary component for the employee.
When it comes to evaluating compensation structures, the first thing to keep in mind would be the supposed reactions of employees if they know about the potential reductions in their "take-home" pay. The employers considering how to accommodate the scheduled increases will evaluate the parlance and structure of individual contracts.
The accompanying Treasury Laws Amendment ('Your Future, Your Super') Bill 2021 Amendment has a new change called "stapled" superannuation fund accounts, which effectively "follows" workers when they change their jobs. The "stapling" process, which will be implemented from 1 November 2021, will see the recognition of a new employee's superannuation account by the employer and is required to make obligatory contribution superannuation payments to that existing fund. If employers fail to comply with this development by the due date, they are likely to face penalties from the Australian Tax Office (ATO) for late or inaccurate payments.
When starting their new and fresh jobs, employees may opt to change funds, which can be the standard fund offered by their employer. In conclusion, this amendment seeks to stop the creation of numerous employee accounts in the face of job mobility.