What is Choice of Fund?
What does Choice of Fund mean to you as an employer?
How can I prepare for Choice?
How does Choice impact your employees?
What is Choice of Fund?
The "Choice of Fund" legislation allows many employees to choose the superannuation fund their employer makes superannuation guarantee (SG) contributions into from 1 July 2005.
The Choice of Fund legislation is designed to encourage employees to take a greater interest in their superannuation. Enabling employees to choose where their contributions are applied allows them to take greater control in the accumulation of their retirement savings.
What does Choice of Fund mean to you as an employer?
Will Choice Affect me?
The Choice of Fund legislation exempts some employers from offering choice to their employees. It is important to ensure that you are aware of the awards or agreements covering each of your employees to determine your responsibilities under the legislation.
Some companies will have different arrangements for their employees. You will need to understand all the awards that cover or agreements that have been established with your employees to determine if you must comply with the Choice of Fund legislation.
If your employees are covered by a Federal or Territory award (including Victorian common rule award); or there is no award, they are eligible for Choice of Fund. This is so notwithstanding the terms of the award.
Under the current legislation an employee will not have to be offered choice in accordance with the Choice of Fund regime where among other things:
- If you contribute to the Commonwealth Superannuation Scheme (CSS) or the Public Sector Superannuation Scheme (PSS) for an employee they will not be able to choose a fund under the legislation prior to 1 July 2006.
- If you contribute to an unfunded defined benefit public sector scheme other than CSS or PSS for an employee they will not be able to choose a fund under the legislation.
- If a Certified Agreement or an Australian Workplace Agreement covers any of your employees and requires you to make a superannuation contribution for them they will not be eligible to choose a fund under the legislation.
- If your employees are covered by a State Industrial Award they will not be eligible for Choice of Fund where the Award requires you to make a contribution for them
Visit the Australian Government's SuperChoice web site for further information on eligibility.
What are my obligations as an employer?
If you have identified that you have employees eligible for Choice of Fund, you will be required in respect of each employee to:
| |
|
| Select an employer fund |
You must select an employer fund to pay your employer SG contributions for your employee if your employee does not make a choice. |
| Offer Choice |
For employees as at 1 July 2005:
You are required to provide each employee eligible to make a choice and employed as at 1 July 2005 with a Standard Choice Form by 29 July 2005. The Standard Choice Form can then be used by your employees to advise of their chosen superannuation fund.
New employees from 1 July 2005:
You must give each new employee a Standard Choice Form within 28 days of commencing employment.
Ongoing
Once an employee has been offered choice you do not have to regularly offer choice again. However there are times when you will have to provide an employee with a Standard Choice Form. They include:
- if an employee has not previously exercised choice and you change the employer fund;
- if you become aware that the fund chosen by an employee is no longer a complying fund you must give the employee another Standard Choice Form within 28 days of becoming aware of the fund's changed status;
- if an employee asks for a Standard Choice Form and they have exercised choice within the previous 12 months you have a discretion as to whether to offer them choice. Where they are eligible to exercise choice the Form must be given within 28 days.
|
| Keep records |
You need to maintain records that show you've met your Choice obligations for a period of 5 years. |
What is an employer fund?
An employer fund is the fund selected by the employer as the fund into which to pay superannuation guarantee contributions for employees if they do not exercise choice.
If an employee is eligible to choose a fund for their employer contributions but does not exercise their right or they make an invalid choice, the employer can continue to pay their employer contributions to the employer fund.
The employer fund can be any complying superannuation fund or retirement savings account. If the employer fund is a superannuation fund it must offer minimum levels of death cover for members:
- at a premium of at least $0.50 per week for those under 56 years, OR
- with at least the level of insurance cover shown below:
| Age range |
Level of insurance |
| 20-34 |
$50,000 |
| 35 to 39 |
$35,000 |
| 40-44 |
$20,000 |
| 45-49 |
$20,000 |
| 50-55 |
$7,000 |
It is not a requirement that the employer select that minimum insurance cover, provided it is actually offered by the fund.
What is in the Standard Choice Form?
The Standard Choice Form is an Australian Taxation Office form, which must be given by employers to eligible employees to allow employees to choose the fund into which their superannuation guarantee (SG) contributions are paid. It consists of 3 parts.
Part A must be completed by the employer and includes:
- employer name
- employer fund name and other details
- prior fund to which employer (SG) contributions have been made
- details of whether any super contributions in excess of the 9% SG contribution will continue to be paid if the employee chooses a fund other than the employer fund.
Part B must be completed by the employee if they wish to make a choice.
Part C includes space for the employer to record the date on which they received the Standard Choice Form from an employee who makes a choice. This is important as all records must be kept for a period of 5 year.
Can I refuse my employee's Choice of Fund?
A Choice of Fund nomination by your employee can only be refused if:
- your employee has chosen a fund that is not complying
- your employee has chosen a fund that will not accept your contributions;
- your employee has not provided all relevant fund information;
- your employee is a member of a defined benefit fund and if they exercised choice of fund would still be entitled to the same retirement, resignation or retrenchment benefit from the fund; or
- your employee has nominated another chosen fund within the previous 12 months.
What records do I need to keep and for how long?
You will need to maintain records that show you've met your Choice obligations including:
- details of employees who are not eligible for Choice of Fund;
- details that the employer fund meets the minimum death cover requirements;
- evidence that the Standard Choice Form has been provided to eligible employees (soft or hard copy); and
- written information from employees who have nominated a chosen fund including the date of the choice.
What penalties could be applied?
The penalty for not contributing to a chosen fund is a maximum of $500 per employee per quarter. The penalty will be payable to the ATO and applied by the ATO to the employee's account as an additional superannuation guarantee contribution.
How can I prepare for Choice?
What needs to be done prior to 1 July 2005?
- Are your employees eligible for choice? What awards and agreement are your employees under? What do those awards and agreements provide in relation to your contribution obligations? Are all / some of your employees entitled to receive choice?
- Choose an employer fund for your employees.
- Ensure that administrative requirements have been established for the inclusion of choice for all new employees. Payroll or administration processes will need to be updated to ensure that all eligible new employees receive a Standard Choice Form from 1 July 2005.
- Ensure payroll or administration processes enable superannuation guarantee contributions to be paid to various super funds if nominated by employees.
What needs to be completed prior to the 29 July 2005?
- All eligible existing employees as at 1 July 2005 must receive the Standard Choice Form before 29 July 2005.
- You will need to determine the most effective method of distributing these forms to employees e.g. e-mail might be a suitable distribution method.
Going Forward
- Ensure that payroll or administration process are aware that choice contributions need to be applied to the chosen fund within 2 months of receiving the request from eligible employee.
How does Choice impact your employees?
What funds can employees choose?
Employees can choose any complying superannuation fund or Retirement Savings Account (RSA).
What do employees do to nominate a Choice Fund?
An eligible employee can make a choice at any time by giving their employer the necessary information about their selected fund in writing or by completing Part B of the Standard Choice Form. This must include:
- the full name and contact details of the fund
- the employee's account name and membership number in the fund
- the fund's Australian business number (if it has one)
- the fund's product identification number
- written advice from the fund's trustee that it is complying and can accept employer contributions, and
- information about the method of payment for your contributions and the information needed to make the payments
How often can employees nominate a chosen fund?
The legislation stipulates that an employee can only nominate a choice every 12 months. You can however accept choice nominations more regularly but you are not required too.
Can I offer choice to my employees even if I am not required to do so?
The Choice Legislation does not prevent you from offering choice of fund to your employees even where you are not required to do so. You must however ensure that where a State industrial award or certified agreement covers your employees you do not breach the terms of that instrument.
Before you make a decision:
see your financial adviser;
email us, or
Call 13 11 55 - ask for "Life and Super".
Disclaimers:
This Education Pack is published by Suncorp Financial Services Pty Ltd ABN 50 010 844 621, Australian Financial Services Licensee ("the Licensee"). The Licensee is a member of the Suncorp Group and may recommend products provided by related companies. As a result, those companies may receive fees or charges, details of which are set out in the relevant Product Disclosure Statement. The Licensee receives commission from the providers of products that it recommends, including other members of the Suncorp Group. Further information about these commissions is contained in the Licensee’s Financial Services Guide.
Any advice contained in this Education Pack is provided by representatives of the Licensee and has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the advice you should consider the appropriateness of the advice having regard to your own objectives, financial situations and needs. Where the advice relates to the acquisition, or possible acquisition, of a particular financial product, you should consider the Product Disclosure Statement before making any decision regarding the product. For a copy of the Product Disclosure Statement or the Licensee’s FSG contact us on 13 11 55, electronically on direct@suncorp.com.au or at: Suncorp Financial Services Pty Ltd, GPO Box 1453, Brisbane Qld 4001.
