Compliance with superannuation rules and regulation is an oft-moving goalpost for HR and employers. HR Leader examines some of the latest issues and trends in superannuation and looks at how employers can tick all the compliance boxes
Following the release of the Henry Tax
Review last week, employers may have
to contribute a minimum of 12 per cent
to the superannuation funds of their
employees from July 2019.
Yet employer contributions – currently running
at a total of around $72 billion a year – are
often already over the current mandatory
contribution level, proving that super is high on
the agendas of many organisations.
But as always, ever-changing compliance and
regulation are set to provide employers with a
whole new set of challenges.
Pauline Vamos, CEO of the Association of
Superannuation Funds of Australia (ASFA),
says unions have warmly welcomed the
increased rate of contributions to
superannuation, and employers can expect
superannuation to have a higher profile in
negotiations about remuneration in the future.
Already, around one in four employees receive
the benefit of contributions in excess of 9 per cent, she notes.
Over time, Vamos also notes that employers
are paying to more and more superannuation
funds as employees on an individual basis
exercise choice of funds. Payroll systems need to
cope with this, she adds, including the ability to
pay contributions to the self-managed
superannuation funds of employees. In terms of
compliance, Vamos states that employees need
to make sure that their payroll and payment
systems are equipped to do this, and to have full
employee information (full name, date of birth,
tax file number, current address, insurance
preferences) on hand.
Regulatory changes in the wind
Adam Kirk, general manager of Sherlock Consulting, a consulting firm
which specialises in corporate super and employee benefits, says that
government legislation is suggesting that the future of employer
superannuation is “My Super” – an “overly simplified superannuation
default with no investment choice and limited insurance options. The
concern from an employer point of view is that it could serve to increase
the apathy that already exists around superannuation,” asserts Kirk, who
notes that statistics have proven that adviser driven superannuation plans
have higher average balances than other styles of default superannuation.
Vamos believes the reduction in the caps to the amount of tax
deductible superannuation contributions that an individual employee
can receive the benefit of means that more employees may inadvertently
exceed the caps.
While this is primarily the responsibility of the employee, she says
there will be pressure on employers to let employees know when they
are in danger of exceeding the caps in any given year because of the
combination of compulsory and salary sacrifice contributions.
“As a result of the recommendations of the Cooper Review there
may be changes to legislation so that most employers are required to
use electronic means to provide superannuation contribution payments
and also information about the employees the contributions are being
Common super pitfalls
Superannuation should not be an administration nightmare for employers,
says Kirk, who adds that corporate superannuation specialists can
recommend default solutions that minimise the time spent on
administering employer superannuation.
“Modern superannuation funds can map their systems to accept
contribution files as they are produced by your payroll system,” he says.
“This will minimise double handling and significantly reduce the
number of potential errors that could occur. In addition they also run
efficient clearing houses at minimal or no cost meaning only one
contribution need be made no matter how many employees have elected
choice of fund.”
Vamos says that a common pitfall for employers is not calculating
compulsory superannuation payments (superannuation guarantee)
correctly and also not paying them on time. She adds employers must use
ordinary time earnings, as defined in the superannuation guarantee law,
to calculate the minimum super guarantee contributions required for
your eligible employees. Some employers previously were able to use a
special earnings base (lower than ordinary earnings) which was set out in
an industrial award or agreement.
Vamos also notes that many contractors, depending on the nature of
their engagement with an employer, are also entitled to superannuation
guarantee contributions. “Having an ABN does not necessarily exempt a
contractor from being eligible for superannuation guarantee,” she asserts.