Under changes made to the superannuation legislation, it will no longer be compliant for an enterprise agreement to nominate a specific fund into which the employer will contribute for all employees. This effectively removes a loophole that allowed enterprise agreements to extinguish an employee’s right to choose a complying fund for themselves. The change affects agreements voted in from 1 January 2021.
Changes to the Superannuation Guarantee (Administration) Act 1992 (“SG Act”) now mean that some employees – who had previously been locked out of choosing a fund – will be able to exercise a choice when a new enterprise agreement is voted in.
Under current rules, an employer’s compulsory superannuation contributions must be made into a fund that complies with the employee choice of funds requirements of the SG Act. One of the ways to comply is if the contribution is made to a specified fund under, or in accordance with an enterprise agreement. This has enabled unions to lock in every employee’s “choice” as a binding collective choice in favour of an industry fund.
This will no longer comply with the SG Act and may expose the employer to an increased superannuation guarantee charge.
The amendments only apply to enterprise agreements made on or after 1 January 2021. They do not apply to workplace determinations or enterprise agreements made before that day. Under the Fair Work Act 2009 (Cth) an enterprise agreement is “made” when a majority of those employees who cast a valid vote approve the agreement.1
What should employers do next?
If your employee’s ability to choose their own superannuation fund is restricted, you should seek advice.
It is preferable that superannuation clauses are not included in enterprise agreements. The superannuation legislation deals with it. Employers who are drafting or negotiating an enterprise agreement should ensure that if a clause is to be included, it should be reviewed to ensure that it is compliant with this and other requirements for superannuation clauses and that it does not create unintended obligations or liabilities for the employer.
Require further information/assistance?
If you require further information or advice, please contact one of our consultants.
1 S 182(1)