Changes to super system to save Australians $17.9 billion over next decade

24 June 2021

The Federal Government’s Your Future Your Super (YFYS) Bill has passed the Australian Senate, designed to reform Australia’s $3.1 trillion retirement system.

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The Federal Government has flagged that its superannuation changes will save Australians $17.9 billion over ten years and deliver the following benefits:

  • Your superannuation follows you: prevent the creation of unintended multiple superannuation accounts.
  • Empowering members: by making it easier for members to choose a high-performing product that meets your needs.
  • Holding funds to account for underperformance: protecting members from poor outcomes and encouraging funds to lower costs and fees to boost Australians’ retirement incomes.
  • Increasing transparency and accountability: for how superannuation funds use members’ savings.

Key features of the legislation include a requirement of the Australian Prudential Regulation Authority (APRA) to conduct an annual performance test of MySuper products and other funds as specified, to address fund underperformance. The results of the annual performance tests will feed into a new public comparison tool run by the Australian Taxation Office (ATO) called YourSuper.

The Government’s changes will also see the introduction of a new Best Financial Interests Duty to ensure all super fund expenditure is in the interests of members. The duty will give effect to recommendation 22 of the Productivity Commission report. Overall, the measure seeks to remove ambiguity on how funds should be spending members’ money.

The legislation also addresses the issue of Australians accruing multiple super accounts as they change jobs by ‘stapling’ a member’s account to them as they move between employers.

Industry concerns have focused on the administrative burden on employers to implement the ‘stapling’ initiative, with an automated system for checking which fund a new employee belongs to having not been developed by the ATO. As the legislation stands from 1 November 2021 for new employees that do not choose a fund, the employer will have to go into the ATO portal one new staff member at a time, look for the ‘stapled account’ and then transfer the details to their payroll system and then do the same for the next new employee.

Engagement and lobbying from industry stakeholders, including the Australian Chamber of Commerce and Industry (ACCI) in collaboration with the Victorian Chamber, saw the Federal Government remove proposed powers for an investment veto mechanism and delay the stapling commencement date from 1 July 2021 to the 1 November 2021.

The lack of an automated ATO system will add additional complexity and process when onboarding new employees – particularly for large employers which may have hundreds or even thousands of new employees a year.

At a time when businesses particularly in Victoria are still grappling with the impacts of the COVID-19 pandemic, governments should be doing all they can to reduce employer obligations.

The Victorian Chamber, in collaboration with ACCI will continue to advocate to the Federal Government to ensure that the interests of Victorian businesses are front of mind.

 

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