Further technical detail needed on new super measure
While the government’s plans to staple existing superannuation accounts to members is a welcome measure, there are still some technical details relating to multiple accounts and insurance which the government will need to address, says Heffron.
As part of its Your Future, Your Super package, the government revealed plans in the federal budget on Tuesday to staple existing superannuation accounts to a member in order to avoid the creation of a new account when the person changes their employment.
Heffron head of SMSF technical and education services Lyn Formica explained that under the current system where an employee doesn’t make a choice about which fund they’d like their superannuation guarantee contributions to go to, contributions are made to the employer’s default fund.
“This inevitably means that many individuals end up with multiple superannuation accounts when they change jobs, simply because they fail to nominate their existing fund as their chosen fund,” she said.
From 1 July 2021, the government has proposed that an individual’s super fund will be stapled to them, which means that if an employee does not nominate a fund at the time they start a new job, their new employer must pay their super contributions to their existing fund rather than the employer’s default fund, she said.
Details of an employee’s existing fund will be available to their employer via the ATO.
Speaking in a Heffron webinar, Ms Formica said it is still unclear, however, how these rules would work if the employee already has multiple super accounts at the time they change jobs.
For example, the process for deciding which fund of these multiple funds the contributions will be paid to is still uncertain, she said.
The fund that the employer decides to pay the contributions to may not be the fund holding life insurance.
“One of those [multiple] funds may not recognise me for life insurance for my occupation,” she noted.
“There is a lot of detail that the government still needs to work through as they consult on getting these measures ready, but essentially, it would seem to be a good idea in terms of improving people’s superannuation options.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.