A breakdown of the federal budget changes to superannuation
This year’s federal budget announced several proposed changes to superannuation and the way the super system works. You may have seen references to some of these changes like “super stapling” or “default”, however rest assured these changes are aimed to make your super work harder for you. These changes are proposed to become effective from 1 July 2021.
The main proposed changes are:
- The introduction of a new super comparison tool
- Super funds will be subject to an annual performance test
- Your super will follow you to your new job
- Pensioners to receive additional Economic Support Payments
We understand super is not always easy, that’s why REI Super is here to help.
Super that follows you
The Government is proposing to change how your superannuation fund is decided when you move from one job to the next.
Currently, when you change jobs, if you do not tell your new employer which fund you would like your super to be paid, your employer will create an account for you in their nominated default fund into which to pay your super guarantee (SG) and any extra contributions such as salary sacrifice. This how you can end up having multiple super accounts.
From 1 July 2021, when you change jobs, if do not inform your employer which fund you would like your super to be paid, your new employer will identify your existing fund through the ATO and use this fund for superannuation contributions. This is called “stapling” your super account to you.
In other words, the employer will not automatically ’default’ the new employee to their nominated default super fund.
Current default arrangements (i.e. employers creating an account with nominated default super fund) will continue for employees who do not have an existing super account, such as those joining the workforce for the first time.
The second phase will occur from 1 July 2022, when the ATO is to provide an automated service to communicate the relevant super fund details between the employer’s payroll and the ATO.
Introduction of an online comparison tool
The Government aims to make it easier for Australians to compare their options by creating a new, interactive, online comparison tool called YourSuper.
For those looking to select their own super fund, the new online YourSuper comparison tool will help them compare the performance of MySuper products and make an informed decision.
The government outlines the comparison tool could:
- Provide a table of simple super products (MySuper) ranked by fees and investment returns.
- Link you to super fund websites where you can choose a MySuper product.
- Show your current super accounts and prompt you to consider consolidating accounts if you have more than one.
Annual performance checks
The Government and the superannuation regulator, the Australian Prudential Regulation Authority (APRA), are focused on improving performance for members.
A further proposed reform is to have APRA develop benchmarks for investment underperformance and to assess every fund’s MySuper (default) products annually. Funds which underperform over two consecutive years from July 2021 would not be able to accept new members.
Additional payments for pension accounts
To help Australians through the financial challenges they may endure because of COVID-19, the Government will provide two additional economic support payments of $250 each to pensioners and other eligible recipients, such as people receiving Disability Support Pension or Carer Payment. These payments are on top of the two previous economic support payments of $750 to those on social security and other eligible recipients. This measure will benefit around 5.1 million pensioners.
Employers and super guarantee payments
The legislated timetable to increase the Superannuation Guarantee rate to 12% currently remains, however this is still on the agenda.
The current rate is 9.5% and is due to increase gradually to 12% by 30 June 2026. Click here to view the full timetable to increase.
Head over to budget.gov.au for more information.
.......................................................
The information contained in this article does not constitute financial product advice. However, to the extent that the information may be considered to be general financial product advice, REI Super advises that REI Super has not considered any individual person’s objectives, financial situation or particular needs. Individuals need to consider whether the advice is appropriate in light of their goals, objectives and current situation. Members should obtain and read the Product Disclosure Statement for REI Super before making any decisions. REI Superannuation Fund Pty Ltd ABN 68 056 044 770 AFSL 240569. RSE L 0000314 REI Super ABN 76 641 658 449 RSE R1000412 MySuper unique identifier 76641658449129. October 2020.