Changes to superannuation are set to come into effect already this year to ensure better outcomes for its members. They were announced in the Government’s Your Future, Your Super package as a part of the Federal Budget 2020-2021. Here are some of the superannuation changes that we can expect in this year.
More super to be paid
Following Treasury announcements, superannuation rates are scheduled to increase to 10 percent of wages from 1 July 2021. However, the Federal Government is yet to officially commit this change. That will be the first increase since 2014 and it is expected to hit the point of 12 percent by 2025 rising by 50 basis points each year.
What does it mean for you? In fact, it is extra 0.5 per cent more super on your payslips and, hopefully, will not come at the expense of wage growth.
Note: The superannuation rate was formerly set to increase to 10% in July 2015. However, the government decided to maintain the gradual increases in the rate and delayed this increase by 7 years until July 2021.
‘Stapling’ the super account
“Under our reforms, your super will follow you,” said Treasurer Josh Frydenberg in his speech with regards to the federal budget.
According to the 1 July changes an employee will be tied to their super fund when they change jobs. This measure aims to stop multiplying super accounts, duplicating fees for super members, and increasing super balances.
As per current situation, most employees in Australia can choose a super fund for their retirement savings, but some of them receive so-called ‘super funds by default’ chosen straight away by their employers. If you’ve been employed by more than one employee, you might have your contributions been paid into more than one super fund. Under a new regulation, employers are required to find out if a new employee has already an existing super fund or an employee can notify of a preferred fund to their employer. Only after that and in case there is no existing fund, the employer is allowed to create an account with a default super fund.
Super fund efficiency and transparency
An annual performance test was also introduced by Frydenberg’s budget for 2020-2021, aiming to detect underperforming super funds on the market. Those that fail two consequence years tests will be banned from accepting new members, and the results will be made public.
In addition to the annual test, increased fund transparency requirements will take place. This means that fund administrators will be required to disclose information about their investment decisions.
To conclude
Overall, additionally to upcoming changes for super fund members, there is an important point to remember: personal responsibility for choosing the right fund and ongoing monitoring of its position on a market.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page.