Stapled Super

Stapled Super – What is it?

From 1 November 2021, if new employees start and they don’t choose a super fund, employers may have an extra step to take to comply with choice of fund rules and request the employees’ stapled super fund details from the ATO.

For a summary of what you need to know, download the ATO’s Ditigal Fact Sheet 

Why is it important?

A stapled super fund is an existing super account linked, or ‘stapled’, to an individual employee so it follows them as they change jobs. This aims to reduce account fees, avoiding new super accounts being opened every time an employee starts a new job. If you don’t meet your choice of super fund obligations, additional penalties may apply.

The previous default system of super has a more problematic side, especially for workers. It has contributed to a massive $3.6 billion pool of lost and unclaimed super, which currently sits with the Tax Office. A good chunk of this money has ended up there because people inevitably switch jobs, and their employer signs them up to a new super fund with each move. Meanwhile, any old funds are left sitting idle and eventually make their way to the unclaimed super section of the Tax office.

Super stapling is aimed at solving, or at least reducing, this problem. From 1 November 2021, whenever an employer hires a new staff member, who doesn’t specify which fund they’d like the boss’s contributions paid into, the employer is required to contact the Tax Office. This will show if the latest staff member has an existing super fund. If they do, the boss’s contributions can be paid into that fund rather than signing them up to a new one.

What do I need to do next?

Request stapled super fund details for employees | Australian Taxation Office (ato.gov.au)

You will need to request stapled super fund details for new employees who start on or after 1 November 2021, when:

  • you need to make super guarantee payments for that employee
  • they are eligible to choose a super fund, but don’t. This includes contractors who you pay mainly for their labour and who are employees for super guarantee purposes

You may need to request stapled super fund details for some employees who aren’t eligible to choose their own super fund. This includes employees that are:

  • temporary residents
  • covered by an enterprise agreement or workplace determination made before 1 January 2021.

If your new employee chooses a super account they already have, or chooses your default fund, you do not need to request stapled super fund details for them.

Once an employee tells you their choice of super fund, you have 2 months to start paying contributions into that fund. If you have received a choice of super fund form from a new employee from 1 November 2021, and you must contribute before this time, if you don’t pay to the employee’s choice fund, you should pay into their stapled super fund or your employer nominated account if the ATO advises you that they do not have a stapled super fund.

If your new employee chooses a super account they already have, or chooses your default fund, you do not need to request stapled super fund details for them.

Once an employee tells you their choice of super fund, you have 2 months to start paying contributions into that fund. If you have received a choice of super fund form from a new employee from 1 November 2021, and you must contribute before this time, if you don’t pay to the employee’s choice fund, you should pay into their stapled super fund or your employer nominated account if the ATO advises you that they do not have a stapled super fund.

When does this commence?

For new employees commencing after 1 November 2021

From 1 November 2021 until 31 October 2022, the ATO says it will provide employers with help and assistance to comply with the stapled fund requirements. During this transitional period, the ATO will reduce any choice shortfall to nil if that shortfall arose due to the employer’s lack of knowledge of the stapled fund requirements rather than intentional disregard. This transitional approach applies only to the stapled fund changes to the choice of fund requirements, it does not apply to existing choice rules.

What if you haven’t made a request when you should

We will help and support employers in the first instance as this change is introduced.

You may have to pay the choice shortfall penalty (which is the additional super guarantee charge) if you contributed to your default fund without making a stapled super fund request.

You should immediately request a stapled super fund for your employee and begin making contributions to the fund that is returned in response to your request.

To avoid the choice shortfall penalty, make sure:

  • you request the stapled super fund details for your employee as soon as possible if they have not provided you with their choice of fund
  • you pay the employee’s full super guarantee contribution to the stapled super fund we return to you in the request
  • pay the contribution to the stapled super fund by the quarterly due date.

Key Takeaways

If you’re unsure about what this means for you, or want to outsource your payroll to experts, please contact us.

Bookmark the ATO reference guide > Stapled super funds Reference guide for employers (PDF, 406KB)This link will download a file.

Alexander Laureti is the Principal and Managing Director of LMS Advisory. He holds a Bachelor’s degree in Accounting and Law, and he is a Fellow of the CPA (Certified Practising Accountants) and a Chartered Tax Advisor. Alexander has over 17 years of experience as an accountant in Public Practice.
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