From 1 November 2021, if employees do not choose a super fund when they commence, most employers will have to check with the ATO to see if their employee has an existing super account, known as a 'stapled super fund', into which they must pay the employee's super guarantee contributions. This will affect the legality of clauses in contracts and in some enterprise agreements that permit a default fund to be used at the employer’s election. Employers need to act on this. EMA Consulting has some recommendations.
The changes to superannuation legislation
EMA Consulting’s recommendations are limited to the employment law and industrial relations aspects of the change. Employers must take advice about superannuation from qualified tax accountants. You can find out more about the changes from the ATO website.
Currently, if an employee does not nominate a superannuation fund, the employer may contribute to a default fund (provided they have complied with the procedural requirements).
The default fund might be one nominated in an enterprise agreement, or the employer’s nominated default fund.
For employees commencing from 1 November 2021, the default fund cannot be used until after the employer has checked with the ATO and obtained a notification that the employee does not have a stapled fund. If there is a stapled fund, contributions must be made to that fund (unless the employee subsequently nominates another fund).
What if the enterprise agreement nominates a default fund, or permits the employer’s default fund to be used?
The exemptions for enterprise agreements are complex and employers should take specific advice.
Generally, if the Agreement commenced after 1 January 2021, any clause permitting a default fund to be used for an employee commencing after 1 November will have no legal effect. Following it could breach the superannuation laws. There could even be issues for employees who commenced between the start of that enterprise agreement and 1 November.
We anticipate that the Fair Work Commission will begin challenging new agreements that are submitted for approval with such clauses.
How this is resolved in new enterprise agreements will vary according to the specific workplace arrangements and the negotiating parties. We strongly recommend that employers take industrial relations advice:
before agreeing any superannuation clause in a new enterprise agreement; and
about the lawfulness of following default fund clauses in current enterprise agreements.
Review contracts of employment
Letters of offer and contracts of employment often refer to an employer’s default fund. All such documents need to be reviewed because:
they may be unlawful if followed; or
they may constitute a misrepresentation of an employee’s rights (which could result in penalties under the Fair Work Act 2009).
EMA Consulting will soon change its template contracts and letters of offer. Subscribers to MY ERLibrary will be notified when the changed templates are uploaded to their subscription service.
EMA Help Available
If you need help reviewing your contracts, enterprise agreements or letters of offer, please contact your Consultant.
Require further information/assistance?
This EMA Note is not comprehensive advice about your situation and does not cover all your obligations. If you require further information or advice, please contact your Consultant.