Important super updates

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What you need to know about recent changes to super legislation and the details you should be aware of as an employer.

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With the start of a new financial year, the key updates in super for employers from the start of the 2023/24 financial year are:

1. 

The Super Guarantee (SG) rate has increased to 11% of ordinary time earnings. This started from 1 July 2023 and is part of a staged increase in the SG to 11.5% earnings in 2024/25 and finally 12% in 2025/26. Employers should note that: 

  • The ATO is ramping up SG compliance surveillance through linking payroll data received in real time through Single Touch Payroll and contribution information received from super funds.  
  • New employment laws have passed that makes meeting SG obligations an employee entitlement under the National Employment Standards (NES). As choice of fund rules are part of an employer’s SG obligations, the NES will also cover fund choice and stapling obligations. Although the ATO is the primary regulator, if the ATO has not yet acted, employees can take action under the Fair Work Act. 
 2.

The transfer balance cap has increased to $1.9m from 1 July 2023 (up from $1.7m in 2022/23). The Transfer Balance Cap is the maximum amount of super savings that can be transferred to super pensions in the tax-exempt retirement phase. Employers should note that: 

  • Transition to retirement (TTR) pensions are not affected because these are not in the retirement phase, and investment earnings are taxed at 15%. TTRs will count towards the individual’s transfer balance cap on their 65th birthday, or earlier if the individual meets a condition or release and informs the superfund.
  • The concessional contribution cap remains at $27,500 and the non-concessional contribution cap remains at $110,000 per annum (up to $330,000 if the individual is eligible for the bring forward cap, which depends on their total superannuation balance last 30 June). 
3. 

The new $1.9m threshold also impacts whether members can make non-concessional contributions during the financial year. If the total super balance (total amount held in super and pensions) on 30/6/2023 is more than $1.9m, any new non-concessional contributions (eg personal contributions or spouse contributions) will treated as an excess non-concessional contribution. Employers should note:

  • Super funds are required to report super balances to the ATO by 31/10/23. Employees can access their total super balance figure through their MyGov account, however for many the final figure will not be available until November 2023 or later.  
4. 

Minimum annual payments for account-based superannuation pensions have returned to standard rates starting 1 July 2023, following several years of reduced rates during COVID. This means the minimum pension payments are:

  • Under age 65 (including Transition to Retirement pensions): 4% account balance on 1/7/23 (up from 2% for 2022/23) 
  • Age 65 to 74: 5% account balance on 1/7/23 (up from 2.5% for 2022/23)
  • Age 75 to 79: 6% account balance on 1/7/23 (up from 3% for 2022/23).  

What is to come: Payday super

As part of the 2023 Federal Budget, the Government announced that from 1 July 2026 employers will be required to pay super guarantee (SG) contributions at the same time as wages and salary. Payday super is a key Government reform to super and is expected to increase the frequency of contributions into super, and significantly reduce employer non-compliance with SG contributions. Under the current law, which goes back to 1992, SG contributions are only required on a quarterly basis. However since 2017 there have been a number of calls to align super contributions with payroll1.  

Some employers have voluntarily moved to align the payment of SG contributions with salary and wages, following the introduction of Single Touch Payroll (STP). STP now includes additional information such as salary sacrifice superannuation contributions and is compulsory for all employers, although small employers can still report quarterly for directors and family members.

The ATO is currently talking to employers and the super industry about the issues involved with the introduction of Payday super, including:

  • The amount and quality of data that will be processed by super funds;
  • The problems employers will have, such as cash flow and workloads, calculating contributions, and onboarding new employees.
  • The role of clearing houses and payroll providers.

The Budget announcement of payday super has brought into focus some of the myriad of rules that apply to employers when it comes to making super contributions - crossing industrial, super and tax law. Under these rules, employers must make:

1.

SG contributions of at least 11% of ordinary time earnings, measured monthly, and paid by 28th day after the end of the quarter. Choice of fund rules and super stapling apply to SG contributions.

2.

Salary sacrifice contributions. Employers are generally not required to offer salary sacrifice arrangements to employees, but if offered the rules are:

  • The salary sacrifice arrangement must be entered into before the salary/wages are earned, and the contribution made to the super fund no later than the 28th day of the following month.    
  • The salary sacrifice contribution must be paid as directed by the employee, even though strict choice of fund rules and super stapling do not apply.   
3.

All employer contributions must be made through SuperStream.

Whilst there are no immediate changes required under the payday super proposal, employers may wish to remind staff to review their contribution arrangements given the increase in SG rates, and consider potential issues should payday super be legislated. 

_____________________________

1 The Senate Economics committee recommended a change from quarterly SG contributions from quarterly to payday or at least monthly.  

 

Important information
This document has been prepared by IOOF Investment Management Limited (IIML) ABN 53 006 695 021, AFS Licence No. 230524 as Trustee of the IOOF Portfolio Service Superannuation Fund ABN 70 815 369 818 (Fund). IOOF Employer Super is a Division of the Fund. IIML is part of the Insignia Financial of companies, consisting of Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate. This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Please obtain and consider the PDS and the Target Market Determination (TMD) both of which are available for consumers to better understand products before making any decision about whether to acquire a financial product. Information is current at the date of issue and may change. Past performance is not an indicator of future performance.

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