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What you need to know about changes to Superannuation

Lisa Spiden - Tuesday, April 09, 2013

As a business owner, you are probably aware that there are some changes planned to superannuation and the minimum requirements paid to employees, but do you know exactly what they are, and how they will affect your business? 

Some changes were implemented last year, and there are further changes that will take effect from July 1 this year. 

Here is a summary of what is coming up.

Increase in compulsory super contributions 

As an employer, you are required to make minimum superannuation contributions on behalf of your employees. The amount you contribute is calculated as a percentage of your employee’s salary, and is currently set to a minimum of 9%, which is paid into a nominated superannuation fund.

The main change to super arrangements is that compulsory employer contributions will rise from 9% to 12% incrementally over the next seven years. As an employer, this means that you need to start planning now.

The superannuation rate changes are noted below

Year Rate
Current rate 9%
1 July 2013 9.25%
1 July 2014 9.50%
1 July 2015 10.00%
1 July 2016 10.50%
1 July 2017 11.00%
1 July 2018 11.50%
1 July 2018 onwards 12.00%

What does this mean for your business?

Employers are going to be faced with increased superannuation costs, which they will either have to pay on top of normal salaries or mitigate via reduced remuneration and the restructuring of an employee’s overall package.

Although you might be tempted to reduce your employees’ remuneration to make up for the extra superannuation contributions, please be aware that this may not be as simple as it sounds. A change in package might breach the employment contract and your employees will need to agree to any changes or new clauses, before you can legally implement them. If they don’t agree, you may need to pay the extra amount.

Another thing to be aware of is that reducing your employees’ remuneration might lead to them dropping below their minimum award entitlements which is a breach of the Fair Work Act.

One way that you might approach these changes, and keep your costs under control, is by keeping the increase in mind when conducting annual pay reviews. Additional superannuation costs can be factored in there, rather than by reducing overall employee remuneration.

Removal of upper age limit

Where previously compulsory super contributions stopped once an employee reached the age of 70, under the new legislation, there is no upper age limit - which means that employers will need to continue paying compulsory superannuation contributions as long as the employee is working. This is a move designed to encourage older workers to stay in the workforce longer.

This change is taking effect from July 1 2013, and will affect businesses with older employees. You will need to make sure you are paying the compulsory superannuation contributions for any employees you have that are 70 or older.

Payslip changes

Currently it is mandatory that payslips show the number of superannuation payments and the amount accrued to date. A number of changes to how superannuation payments are reported on payslips and group certificates took effect on July 1 2012.

If you haven’t already, you will need to ensure that your employees’ payslips display the following information:

  • The name of the super fund they are contributing to 
  • The dates of the next contribution to be made 
  • The amount of all the contributions made, including any upcoming payments 
  • The time period during which any contributions were made

Failure to provide this information on payslips can lead to penalties for your business. Your employees’ group certificates also need to be updated with the relevant information. These changes are designed to keep employees better informed about their super contributions, and allow them to identify any errors or insufficient payments before they go through. This is particularly important with the planned employer contribution increases that are due to take place over the next seven years.

As an employer, it is important that you make sure your payroll systems are updated to reflect these changes, so you can make sure you are in compliance, and don’t end up facing fines.

MySuper

The new MySuper product is a single standardised default super product that can be offered by different superannuation funds. It is designed to modernise and streamline the superannuation process, and make it easier for employees who don’t nominate a specific super fund to their employer.

There are a number of standards that funds offering a MySuper product will have to abide by. These include a ban on hidden fees, standardised reporting policies, and removal of commissions in relation to group insurance, as well as a number of additional changes and features.

Under the new legislation, employees who don’t nominate a superannuation fund will have to have their superannuation contributions automatically paid into a MySuper product and therefore it is the employers responsibility to ensure the businesses default fund is part of MySuper. Employees will still have the same options to nominate alternative superannuation funds, including self-managed super if they wish.

Director responsibilities

As part of the new legislation, company directors are to be held more accountable for any lack of compliance on the part of their business, especially in making payments to superannuation funds. Where previously there were limitations on the responsibility of directors in certain circumstances, these have now been addressed and accountability has been increased.

As the director of a company, you are personally responsible for any non-compliance with the new superannuation legislation. This means that you can personally face fines if your business doesn’t follow the new superannuation rules. The amount you will need to pay if you have failed to make sufficient contributions will be the same as the amount of the outstanding contribution.

The fines for non-compliance with procedural and documentary legislation are $510 per contravention for an individual, and $2,550 per contravention for a body corporate. If your business or company pays the fine on your behalf, you will no longer be considered liable. Your personal liability is also removed if your company appoints an administrator or begins liquidation proceedings before being issued with a penalty notice, or within 21 days of its issue.

The planned superannuation changes are going to affect all businesses that have employees.

Make sure you are prepared and know what your business needs to do to comply with the new legislation, and that your employees are informed of how the changes will affect them, particularly in regards to remuneration and pay increases.

Planning now means that you have a greater chance of a smooth transition when the changes come into effect in July 2013, and reduces the likelihood of your business being disadvantaged financially as a result of the changes.

Data and e-commerce standard

A new data and e-commerce standard is also being introduced to make arrangements for employers to send contributions to all superannuation funds in one standard electronic format. In future, employers will no longer need to provide this information to separate funds in different formats.

To make this change possible, from 1 July this year, Australian Prudential Regulation Authority (APRA) regulated super funds and retirement savings account (RSA) providers will be transitioning to the new e-commerce standard. Once this is complete, from the 1st January 2014 (or earlier depending on the fund), employers will be able to send super contributions to APRA or RSA approved funds according to the new standard.

From 1 July 2014, all large and medium employers (with 20 or more employees) must use the standard for sending contributions to funds. From 1 July 2015, all small employers (with less than 20 employees) must use the standard for sending contributions to funds.

However, small employers may be eligible to use the free Small Business Superannuation Clearing House. Employers can register for the service by visiting the Department of Human Services website www.humanservices.gov.au/smallbusinesssuper or by phoning them on 1300 660 048.

If your an employer who is paying superannuation through an accounting package, payroll or other internal system, it prudent that you start thinking now about your options for implementing the changes, to ensure that your business is compliant with these new changes.