Managing super choice in your business
Who is eligible for super choice?
Whether your employees are eligible to choose their super fund will depend on the type of award or workplace agreement you employ them under. If you're not sure what award or workplace agreement your employees are covered by, you can view the different awards at Fair Work Australia, or contact the workplace relations department in your state or territory.
Employees are generally eligible for super choice if they are:
- covered by Federal Awards
- not covered by any award or workplace agreement, or
- employed by a constitutional corporation under a state award preserved through a national agreement.
Employees are not eligible for super choice if they are:
- members of certain public sector super schemes
- members of certain defined benefit super funds
- covered by state awards, where their employer is not a constitutional corporation
- covered by a Federal certified agreement, collective agreement, Australian workplace agreement, or ITEA that requires the employer to make superannuation contributions
- covered by a state agreement made prior to 27 March 2006 that requires an employer to make superannuation contributions
- covered by a workplace determination, or
- covered by an enterprise agreement.
If any of your employees are eligible for super choice, you must select a default fund for your organisation to ensure that any employees who do not choose their own fund will still receive super payments. From 1 January 2014, your default fund must be MySuper authorised.
Super stapling takes effect on 1 November 2021 – what does it mean for your business?
When new employees start with your business on or after 1 November 2021, you may have an extra step to take to ensure your business is complying with choice of fund rules if your employee doesn’t choose a super fund. You may need to request an employee’s stapled super fund details from the ATO.
A stapled super fund is an existing super account which is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs.
Changes to super choice laws effective 1 January 2021
Changes were made to super choice laws that apply to new workplace determinations and enterprise agreements made on or after 1 January 2021.
From 1 January 2021, employers must provide all new employees with a Standard Choice form when they join the workplace. Existing workers can make their own choice of fund when their existing workplace agreement expires after 1 January 2021
The law is not retrospective, so existing agreements (agreed before 1 January 2021) are not affected by the changes. Workers under existing workplace agreements will stay locked into those arrangements until the next agreement is negotiated after 1 January 2021.
Selecting a default fund
Choosing a default fund for your organisation is an important decision. The choice you make could make thousands of dollars of difference to your employees' retirement savings.
When selecting a default fund for your business, you should consider the:
- ease of administration
- fees that your employees will be charged as members
- insurance options and premiums available to your employees as members
- long-term investment performance of the fund
- education and service the fund offers.
There are five types of super funds in Australia. These include: corporate funds, industry funds, public sector funds, retail funds and self-managed super funds. Industry funds, like Media Super, are run purely to benefit members and profits are returned back into the fund.
Changing your default fund
If you change your default fund, you will need to decide how this affects employees who are members of your previous default fund. You may choose to continue paying contributions into the previous default fund for any employees who signed on to your previous default fund, and enrol new employees in the new default fund. Conversely, you may choose to pay all future super contributions into your new default fund, meaning that any employees who are members of your previous default fund will now have multiple super accounts.
Regardless of the decision you make, you should provide your existing employees with information about your new default fund, and offer them assistance in transferring their superannuation to your new default fund if they choose to do so.
Managing super choice checklist
Managing super choice for your organisation is easy – just follow these five steps below.
- Select a default fund.
- Identify which of your employees are eligible for super choice, and provide them with a Standard Choice form within 28 days of their employment commencing.
From 1 November 2021, if a new employee does not specify a super fund, you must contact the ATO to request their stapled super fund details. Find out more about what super stapling means for your business.
- Make sure each employee's fund choice is valid. For their choice to be valid, they must provide:
- their account name
- their member number, or the fund's Super Product Identification Number (SPIN)
- the fund name, contact details, and ABN
- a letter from the fund confirming its complying status
- confirmation from the fund that it will accept contributions for the employee
- the method of payment required.
- Activate each employee's choice within two months of receiving their valid request
- Maintain records (in English) for five years, showing that you have met your obligations. This must include evidence showing:
- your employees who are not eligible for choice
- that your default fund is a complying fund and meets insurance requirements
- that the Standard Choice form has been provided to all eligible employees*
- which super funds your employees have chosen
- that you have made contributions to your employees' chosen funds
If you do not meet your super choice obligations, you will be liable for the choice shortfall. The choice shortfall is 25% of the value of the contributions that are paid to the wrong fund. The choice shortfall is limited to $500 for a notice period per employee, and is not deductible.
The choice shortfall is part of the SG Charge and applies where:
- you have paid SG contributions to a complying superannuation fund for your employee, but not to their chosen fund
- you have not given your employees a Standard Choice form within the required time.
The Standard Choice form
You must provide new employees with the Standard Choice form within 28 days of them commencing employment with you.
You must also provide the Standard Choice form to an employee within 28 days of:
- your becoming aware that the employee has chosen a fund that is no longer an eligible choice fund
- receipt of a written request from an employee for a Standard Choice form, unless the form has already been provided to the employee within the last 12 months
- your changing the default fund for your organisation if your employee is a member of your previous default fund.
You are not required to provide a Standard Choice form to a temporary resident employee, or when superannuation funds merge. However, employees in these situations still retain the right to choose their superannuation fund if they wish to do so.
Visit the ATO for more information about your responsibilities