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Choice of fund
Employees have the opportunity to choose the super fund their Superannuation Guarantee contributions are made to.
Most people can choose the super fund they want their Superannuation Guarantee (SG) contributions paid into, as long as it's a complying fund. A complying fund is an Australian super fund that receives concessional tax treatment because it's regulated under the relevant super legislation and hasn't been issued with a notice of non-compliance.
Click here for the Zurich Master Superannuation Fund letter of complying status (employees will need to provide this to their employer together with the completed standard choice form).
How does choice of fund differ from investment choice
Investment choice allows a member of a super fund to choose one or more investment options. This has been available in most super funds for quite some time.
Choice of fund, on the other hand, enables members to choose the super fund into which their employer is required to contribute SG contributions.
In addition to investment options, choice of fund will enable members to select their super fund based on level of service provided and fees charged.
Who is eligible to choose a super fund?
Employees can generally choose their super fund if they are:
- Employed under a federal award
- Employed under a former state award, now known as a 'notional agreement preserving state award'
- Employed under another award or agreement that doesn't require superannuation support, or
- Not employed under any state award or industrial agreement (including contractors paid principally for their labour).
Who is not eligible to choose a super fund?
Employees may not be eligible under the superannuation guarantee to choose a super fund if superannuation is paid for them under a:
- State industrial award
- Preserved state agreement
- Federal industrial agreement such as an Australian workplace agreement (AWA)
- Pre-reform AWA, pre-reform certified agreement, collective agreement
- Old IR agreement, individual transitional employment agreement (ITEA)
- Workplace determination, or enterprise agreement (these are defined terms in Federal industrial relations law).
How do employers comply with choice of fund?
If choice of fund applies, an employer must provide a standard choice form within 28 days of the employee starting work unless the employee has chosen a fund prior to the 28th day.
What is a standard choice form?
A standard choice form must be in writing and contain:
- A statement that the employee may choose any eligible choice fund (ie a regulated super fund)
- The name of the fund the employer will contribute to if the employee does not make a choice and
- Other important information as required by the regulations.
Click here to access a copy of the Australian Taxation Office’s instruction booklet and form “Choosing a super fund”.
When does the employee’s choice of fund become effective?
An employee’s choice of fund becomes effective two months after the date the employee has given the employer written notice of the choice (or any earlier time the employer determines).
Can an employer refuse a super fund?
An employer can refuse a super fund if an employee has chosen another super fund in the previous 12 months, or if the employee does not provide written confirmation of:
- A super fund contact details
- A statement that the super fund will accept contributions
- Other prescribed information.
What if the employee does not exercise choice?
If the employee does not exercise choice, the employer must make the employee’s SG contributions to MySuper fund (also known as a default fund). The MySuper fund must offer minimum life insurance cover for members*.
* From 1 July 2008, employers nominated fund must offer minimum life insurance for members.
What are the penalties for not complying with choice?
Employers may face penalties if they do not meet their choice of fund obligations, including;
- Paying superannuation guarantee contributions to a complying fund for employees but not to the fund chosen by them, or
- Not providing employees with a Standard choice form in the required timeframe.
If an employer does not comply with choice of fund they will be subject to a maximum penalty of $500 per employee per notice period (note that any penalty does not reduce any SG shortfall amount for the quarter).