What superannuation changes take effect from 1 July 2023?

A sweeping array of changes to Australia’s superannuation regime are on the horizon with some coming into effect from 1 July 2023.  It is essential that employers are ready to meet their enhanced obligations under the superannuation regulatory regime. Superannuation funds should also be aware of new investment opportunities arising from the 2023-24 Federal Budget.

The latest superannuation changes include:

• an increase in the superannuation guarantee rate;
  
  
• the imposition of the new payday super measures;
  
  
• increasing the visibility of the Australian Taxation Office (ATO) over unpaid super;
  
  
• enhancing the ATO’s unpaid superannuation recovery targets;
  
  
• the reduction of tax concessions for individuals with more than $3 million in super;
  
  
• a change in the jurisdiction of the Australian Financial Complaints Authority (AFCA) to provide for it to hear superannuation related complaints; and
  
  
• the potential creation of more impact investment opportunities for super funds.

The changes in a nutshell

Increase in superannuation guarantee rate

From 1 July 2023, the superannuation guarantee rate will increase from 10.5% to 11%.  Employers should update payroll systems to ensure the correct amounts of superannuation are paid to all eligible employees from 1 July 2023.

Payday super

It is proposed that, from 1 July 2026, employers will be required to pay employees' super at the same time they pay their wages. This measure is part of the ‘Securing Australians’ Superannuation Package’ which was announced as part of the 2023-24 Federal Budget. Currently, employers are only required to pay superannuation on at least a quarterly basis.

This measure will enable employees to check the payment of their superannuation entitlements more easily, and to benefit from higher compounding returns given their super will be paid more frequently.

Employers should consider whether the administrative burden in complying with the payday super measures may be reduced by adjusting the frequency of payment of wages.

Increasing the ATO’s visibility over unpaid super

Under the ‘Securing Australians’ Superannuation Package’, the Federal Government has allocated $27 million to the ATO to improve data capabilities - including matching employer and super fund data to identify instances of underpayment of the superannuation guarantee by employers. An additional $13.2 million has been allocated to the ATO to consult and co-design a new compliance system which will proactively identify instances of underpayment of the superannuation guarantee.

Employers should be aware that the ATO will have more resources to detect non-compliance with the superannuation guarantee regime.

Enhancing the ATO’s unpaid superannuation recovery targets

As part of the 2023-24 Federal Budget, the Government has set targets in the Treasury Portfolio’s ‘Budget Statements 2023-24’ on which the ATO will be assessed on the recovery of unpaid superannuation. The ATO will have targets on the superannuation guarantee distributed as a proportion of superannuation guarantee raised, and the superannuation guarantee charge raised and distributed within 12 months.

Employers should be aware that the ATO will be subject to enhanced targets on the recovery of unpaid superannuation.

Reduced tax concessions for individuals with more than $3 million in super

As part of the ‘Better Targeted Superannuation Concessions’ measures, from 1 July 2025, individuals with a super balance exceeding $3 million will be subject to an additional 15% tax on investment earnings on the portion of their super balance which exceeds $3 million. This means that the headline tax rate will increase from 15% to 30%, for earnings corresponding to the portion of an individual’s superannuation balance that is greater than $3 million. Earnings on assets below the $3 million threshold will continue to be taxed at 15% if held in an accumulation or defined benefit account, and 0% if held in a retirement pension account.

The $3 million threshold is not expected to be indexed, and the ‘Better Targeted Superannuation Concessions’ measures are only expected to impact a modest number of individuals.

Change in AFCA’s jurisdiction to hear superannuation related complaints

On 23 May 2023, Treasury released the Treasury Laws Amendment (Measures for Consultation) Bill 2023 which seeks to amend AFCA’s jurisdiction to hear superannuation matters. The Bill seeks to amend the Corporations Act 2001 (Cth) (Corporations Act) by expanding AFCA’s jurisdiction to include complaints relating to superannuation which are not listed under section 1053(1) of the Corporations Act, which will be heard in AFCA’s non-superannuation jurisdiction. These changes are intended to take effect the day after the Bill receives Royal Assent.

Currently, section 1053(1) of the Corporations Act sets out the matters for which a person may make a complaint relating to superannuation under the AFCA scheme. In MetLife v Australian Financial Complaints Authority [2022] FCAFC 173, the Court held that AFCA only had jurisdiction to hear complaints relating to superannuation if the complaint was specifically listed in section 1053(1) of the Corporations Act. This meant that AFCA could not hear superannuation-related complaints which were not listed in section 1053(1) of the Corporations Act, for which the only avenue to seek redress was via the courts. This is contrary to the intention of section 1053(1) of the Corporations Act, which was not to restrict the complaints which may be made under the AFCA scheme.

Potential creation of more impact investment opportunities for super funds

As part of the 2023-24 Federal Budget, the Government will invest $100 million over five years, to establish a social impact investment Outcomes Fund to make payments to states, territories and service providers for specific projects and agreed, measurable outcomes. It is reported that the Outcomes Fund will help build a market for the use of social impact bonds by state governments, under which a state government pays a return to an investor when a service provider achieves an agreed social benefit outcome. The return may be dependent, at least in part, on the cost savings to the state government in dealing with a social issue which is targeted by the program funded by the relevant social impact bond.

Additionally, the Treasurer will convene an Investor Roundtable to discuss how private capital may support impact investing activities, in response to the recommendations of the Social Impact Investing Taskforce. It is reported that the Investor Roundtable could discuss the establishment of a social impact investing wholesaler, which could be modelled on Big Society Capital, the leading social impact investor in the UK.[1]

The local wholesaler is proposed to be funded by $50 million in seed funding from each of the big four banks, with investments from super funds to follow. The wholesaler may develop deal opportunities and support the growth of social impact fund managers which invests in areas such as social housing, aged care, early education or disability services.

^{[1] Michael Traill AM, Social Impact Investing Taskforce Interim report (December 2019) 4.}