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How many super accounts should I have?

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As at May 2021, the Association of Superannuation Funds of Australia (AFSA) stated there were 24.4 million individual superannuation accounts held by Australians.

Every time we change jobs, and our new employer asks for our superannuation fund details so they can make compulsory contributions. If we don’t have those details at hand, our new employer will make contributions to their “default” fund, thereby resulting in a new account being opened.

As a result, many Australians have ended up with multiple, often small superannuation accounts. Sadly, these account balances are eroded over time to a point where, after fees, charges, and insurance premiums are deducted, nothing is left and the account is closed.

There will be occasions where having more than one superannuation account will be intentional. Where an individual wishes to:

• hold stand-alone insurance through super,
• segregate their taxable and tax-free components for estate planning purposes,
• draw a pension while also continuing to contribute, or
• hold money in the superannuation system even though they have reached their transfer balance cap, maintaining multiple superannuation accounts will be appropriate.

One of the inherent risks of having multiple superannuation accounts is the risk the accounts will become “lost”.

Just imagine, you have multiple superannuation accounts with different super funds opened because you have changed jobs a few times. You then move house and forget to advise your various superannuation funds of your new address. As a result, your super funds lose contact with you.

When a super fund has a lost member, they are required to transfer the lost account to the Australian Taxation Office (ATO). The ATO will then attempt to reunite the lost member with their lost superannuation.

The government-run campaign of reuniting members with their lost super has been quite successful, with around 13 million duplicate accounts having been closed or consolidated, over the course of the past few years.

However, there are still many duplicate accounts in existence. Having multiple accounts can result in duplication of fees and charges.

Looking for lost super and consolidating multiple accounts can be done quite simply by checking the superannuation tab in your MyGov account.

Before consolidating super it is important to speak with your financial adviser to ensure consolidation is in your best interest. Importantly, consolidating super may result in the loss of valuable insurance cover.

 

 

Source: Peter Kelly | Centrepoint Alliance

Is your employer paying the correct amount of super?

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There has been quite a bit of media focus about some employers either not paying or failing to pay the correct compulsory contributions to superannuation for their employees. So serious is the problem, new legislation has been tabled in parliament offering employers a one-off amnesty if they come forward and self-correct unpaid or short-paid contributions.

Despite the superannuation guarantee (SG) system being in place for almost 30 years (it was introduced back in 1992), an estimated 2.1 million employees are being underpaid their SG contributions by as much as $2.8 billion each year.

What is an employer required to pay?

Employers are currently required to contribute 9.5% of an employee’s salary to the employees nominated superannuation fund to comply with SG legislation. The Government is planning to progressively increase the contribution to 12% over the coming years.

The rules relating to SG are quite intricate, however when an employer fails to comply, they become liable to pay an SG charge.

SG contributions are based on an employee’s ‘ordinary time earnings’ and are payable on a quarterly basis. They must be paid by the 28th day of the month following the end of each quarter. So, for your June quarter salary, your superannuation must be paid by 28 July, and then 28 October, January and April respectively.

 

Exceptions and limits

There are very limited exemptions for payment of SG contributions. For example, an employer is not required to pay SG contributions for an employee in respect of those months an employee earns less than $450.

There is also an upper limit of ordinary time earnings on which SG contributions are payable. For the 2019/20 financial year, the limit is $55,270 per quarter. This is referred to as the “maximum contribution base”.

When an employee receives ordinary time earnings of more than $55,270 in any quarter, there is no obligation for their employer to make SG contributions for earnings that exceed that amount.

As a consequence, the maximum SG contributions an employer is required to make at law in 2019/20 is $5,293.40 per quarter.

 

Extra contributions

Some employers may pay more than 9.5%. That is dependent on the generosity of the employer and/or any obligations imposed under an employment contract or workplace agreement.

In situations where a person has two or more employers, and it is likely that their SG contributions may result in them exceeding their contribution cap of $25,000 in a year, recently passed laws allow the employee to opt-out of receiving some SG contributions. Readers who feel they may be affected should seek advice from their accountant or financial planner.

 

The SG for small business

One aspect of the SG often overlooked, is the fact that many small business operators regard themselves as being ‘self-employed’ and don’t believe the SG obligations apply to them, and to family members they may employ.

However, where a small business operates under a (private) company structure, the directors of the company are also regarded as employees for SG purposes. The business has an obligation to comply with the laws relating to the payment of superannuation contributions. However, with the extension of the Single Touch Payroll system to all businesses, the Australian Taxation Office (ATO) now has the tools available to more closely monitor an employers’ compliance with their SG obligations.

 

What can you do?

If you believe your employer has not been paying the correct level of SG contributions, you have two options:

  • you can approach your employer and ask them to make the necessary contributions, and/or
  • you can request the ATO to follow up unpaid contributions.

The compulsory superannuation system is an important part of Australia’s retirement savings landscape. It is important for employees to understand their rights in respect of superannuation contributions and take an active role in ensuring their employers are complying with the SG scheme.

 

Source:  Peter Kelly | Centrepoint Alliance

Lost Super – Do you have any?

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Did you know that thousands of Australians have indirectly ‘given’ billions of dollars of their super to the Australian Taxation Office (ATO)?

When we start a new job, our employer will ask us to provide a heap of information like our address, tax file number, who to contact in the event of an emergency, bank account details and details of our super fund.

Unfortunately, our super fund and account number is not information we have readily available and sometimes we wouldn’t know where to find it. So, rather than trying to find the details, we simply allow our new employer to send their superannuation guarantee contributions off to the ‘default fund’.

We continue to work for a couple of years and then, in the interests of bettering ourselves, we change jobs. When we start the new job, we enter the same cycle with our super and end up with yet another superannuation fund. Around 40% of Australians have more than one super fund.

When superannuation becomes lost or when benefits are not claimed by members when entitled to do so and super funds are unable to contact their members, the super funds are required by law to send the accumulated savings of their ‘lost’ members to the ATO. At the end of June 2017, the ATO was holding around $16bn of lost and unclaimed super.

So, how do you go about finding your lost super?

There are a couple of ways you can do this:

1. Log on to your myGov account (if you have one)  and go to the ATO section. Click on the ‘super’ tab and it will display all the super details the ATO has for you. If you don’t have a myGov account, it is easy to create one.

2. You can fill in a form and send it to the ATO to complete your search for you. This form can be found on the ATO website

3. Many superannuation funds will conduct a search for lost super for their fund members.

4. Many financial planners will also help their clients search for their lost super.

 

Source: Peter Kelly | Centrepoint Alliance