Choice of fund
The choice of fund legislation came into effect on 1 July 2005.
Choice of fund applies to compulsory contributions you make under the Superannuation Guarantee (SG) legislation. Currently those contributions are at the rate of 9 per cent of earnings for employees earning over $450 in any month.
Note that choice does not apply to employees' existing account balances or to any contributions you make over and above the SG rate.
To which employees do you need to offer choice?
Broadly, choice applies to all private sector employees except those for whom you make contributions:
- in accordance with a State award determination or registered or approved industrial agreement where the award or agreement specifies the fund to be used; or
- in accordance with a certified agreement under the Industrial Relations Act 1988 or an AWA or certified agreement under the Workplace Relations Act 1996 where the agreement specifies the fund to be used; or
- to a defined benefit fund, where the employee would still be entitled to the same retrenchment, resignation or retirement benefits under that fund if you paid future contributions to a different fund.
What is an eligible choice fund?
A fund qualifies as an eligible choice fund if:
- it is a complying superannuation fund as determined by the Australian Prudential Regulation Authority (APRA). Asset is an eligible choice fund.
- To check this, log on to www.apra.gov.au, click the Superannuation tab and then select List of Superannuation Funds for a list of complying funds.
How does an employee notify you of their choice?
By providing them with a completed standard choice form. This form will:
- advise the employee that they can choose their own fund; and
- states the name of your default fund should the employee not make a choice; and
- contains additional information as required by the regulations.
If you need copies of the standard choice form, just download them here or contact our client service team on 1800 805 981.
What happens if an employee does not choose a fund?
Their SG contributions may be paid to your nominated default fund. Your default fund must be an eligible choice fund and it must offer a prescribed minimum level of insured death benefits.
Asset Super meets all the requirements to act as your default fund.
What advice can I give my employees as to which fund to choose?
The law doesn’t allow you to provide advice in relation to a financial product such as superannuation, but you are allowed to provide factual information about your default fund. The decision must be made by your employee.
Asset Super does provide free single issue phone based advice which could help your employees to consider the issues with regard to fund choice. They can simply call our client service team on 1800 805 981.
What happens if you don't comply?
If you fail to comply with the choice of fund requirements you will incur a (non tax deductible) penalty.
Assuming you have made contributions but some or all of them have been to a "non chosen" fund, the penalty is calculated as 25% of the shortfall. It is capped at a maximum of $500 per employee per quarter.
If you have paid no SG contributions at all, you will incur the standard SG shortfall penalty as well as the choice penalty.
What do you need to do and when?
You must provide a standard choice form within 28 days of:
- a new employee joining you; or
- an existing eligible employee asking you for a form (unless the employee chose a fund in the previous 12 months); or
- you become unable to contribute to an employee's chosen fund for any reason e.g. it ceases to be an eligible choice fund or it will not accept your contributions; or
- you change your default fund (in which case forms must be provided to all employees who are members in the default fund).
Remember, you do not need to provide a standard choice form if choice of fund does not apply to the employee (see above "To which employees do you need to offer choice?").
Once an employee has lodged the form nominating their chosen fund, you can start making contributions to that fund after two months (or earlier if you decide). Before making any contribution, you will need to be satisfied that the fund is an eligible choice fund. Generally the fund will have confirmed that to the employee.
What records do you need to keep?
You will need to keep records to show that you have met the choice of fund requirements. As a start:
- keep a record of those employees who qualify for choice of fund. If any employees are exempt, record the reason why;
- record the exact date you provided standard choice forms to your eligible employees, how the forms were delivered and what additional information was provided;
- record the exact date on which you receive a completed form from an employee;
- keep copies of all the completed forms you receive;
- keep copies of all information provided by an employee regarding their chosen fund, including confirmation of the fund's complying status;
- record any information you receive that prevents you from being able to contribute to an employee's chosen fund;
- record when contributions are made to the newly nominated fund (especially the first contribution to prove it was made within 28 days of receiving their form).
What happens if Asset Super is your current or preferred fund?
Asset is an eligible choice fund, so it's a natural choice for your default fund.
We've made it easy for you. All you need to do is ask us for copies of our employee information pack, which includes the standard choice form. The form makes it clear that Asset is your default fund, so if employees are happy to be members of Asset there's nothing more for them to do.
What if you're approached about choosing another fund?
If you receive an approach from another default fund, make sure you have all the information you need to make a fully informed decision. You should be aware that it is illegal for funds or their agents to offer certain 'inducements' to you to switch super funds.
How can you compare funds?
For more details about Asset’s Superannuation product, please refer to our Product Disclosure Statement.
You may also wish to seek out further information or comparisons from independent sources. The following websites may be of use, and provide helpful links:
Superratings - www.superratings.com.au
SelectingSuper - www.selectingsuper.com.au
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