Stapled superannuation funds

A stapled superannuation fund is an existing superannuation account linked, or ‘stapled’, to an individual employee so it follows them as they change jobs.

Stapled funds avoid the need to open a new superannuation account every time an employee starts a new job, thus reducing account fees. Note that if the choice of superannuation fund obligations is not met, additional penalties may apply.

If you are an employer, you need to request stapled superannuation fund details for your business’ new employees when:

  • You need to make superannuation guarantee (SG) payments for that employee;
  • They are eligible to choose a superannuation fund but don’t, including contractors for whom you pay mainly for their labour but who are employees for SG purposes.

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

  • Temporary residents; or
  • Covered by an enterprise agreement or workplace determination made before 1 January 2021.

For employees who started working for your business on or after 1 November 2021 and have not provided a valid choice of a superannuation fund, you should make contributions into:

  • The employee’s stapled superannuation fund; or
  • The employer’s nominated account (if the ATO advises you that they do not have a stapled superannuation fund).

If an employee later nominates their choice of a superannuation fund, you have 2 months to start paying contributions into that fund.

Steps to requesting stapled superannuation fund details

Before you can request stapled superannuation fund details, you need to have offered all eligible employees a choice of superannuation fund.

You or your authorised representatives can request stapled superannuation fund details using ATO online services. Check and update the access levels of your authorised representatives in ATO online services. (Our tax adviser may also be able to make a request on your behalf.)

You must also establish an employment relationship. You can request your employee’s stapled superannuation fund details after you submit a TFN declaration or Single Touch Payroll (STP) pay event, which identifies that you have an employment relationship or link to your employee.

Choice shortfall penalty

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

To avoid the choice shortfall penalty, make sure you:

  • Request the stapled superannuation fund details for your employee as soon as possible if they have not provided you with their choice of fund;
  • Pay the employee’s full SG contribution to the stapled superannuation fund the ATO returns to you in the request; and
  • Pay the contribution to the stapled superannuation fund by the quarterly due date.

Our KMT tax adviser will be able to help your business meet its superannuation obligations.

Superannuation for holiday work

From 1 July 2022, you need to pay a superannuation guarantee (SG) for employees at the rate of 10.5%, regardless of how much you pay them. This is because the former $450-per-month income threshold for SG eligibility has been removed.

Take Jane for instance. She is a 22-year-old employee working a short-term job at a restaurant over the holiday season. She works 23 hours a month, earning $430 before tax.

In the past, holiday employees such as Jane would not be paid superannuation as they earned below the $450 income threshold. Now, Jane will be eligible for superannuation paid on her ordinary time earnings at the rate of 10.5%.

This change doesn’t affect other eligibility requirements for SG. Workers who are aged under 18 years still need to work more than 30 hours a week to be eligible.

For example, Anish is a 17-year-old employee working a job at a hotel over the holiday season. Anish works 32 hours in a week at the hotel and earns $800 before tax. He also works 5 hours at his local café, earning $150.

As Anish worked more than 30 hours in one week at the hotel, his employer will need to pay superannuation on the $800 he earned.

As Anish works less than 30 hours a week at the café, he is not entitled to superannuation from this employer. Likewise, Anish is not entitled to superannuation for any weeks he works less than 30 hours at the hotel.

Check your payroll and accounting systems are up to date so you are correctly calculating your employees’ SG payments.

Get new workers onboard faster

Did you know your employees can complete a tax file number (TFN) declaration through ATO online services? This is an easy way for them to provide you and the ATO with the required information. If your new employee has a myGov account linked to the ATO, once they are logged in they can:

  1. Access ATO online services;
  2. Go to the ‘Employment’ menu;
  3. Select ‘New employment’ and complete the form.

Your employees will need your ABN to complete the form. When they submit it, their TFN declaration details are sent straight to the ATO, so you don’t have to. The form will then enable them to print and give you the summary of their tax details. You’ll need the summary so you can input the data into your system.

If your payroll software can link to the online commencement forms, it will automatically receive your new employees’ information from the ATO, saving you time spent entering the information manually. Check with your software provider to find out if they offer this service.

The New employment form can also be used to collect a range of information. Employees can use it to authorise variations to the amount you withhold from their pay for tax or the Medicare levy or to advise you of their choice of superannuation fund. They can also use it to update their tax circumstances with you, for example, if:

  • Their residency status has changed;
  • They no longer have a government study and training loan; or
  • They are claiming the tax-free threshold from another employer.

You can continue to use your current processes when preferred, including providing a paper TFN declaration where the employee can’t create a myGov account or doesn’t have access to the internet.

Talk to our KMT tax adviser if you need assistance with your business tax planning!

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 get professional advice from your accountants at KMT Partners.