Superannuation is a big, big deal in Australia. Since the introduction of the superannuation guarantee scheme in 1992, billions of dollars have poured into funds. In my view, this is probably the most significant policy enactment of any Australian Federal Government. And it was a Labour Party policy.
When the Liberal Government took office, it introduced superannuation fund choice. Prior to this an employee was required to contribute to whichever fund the person’s employer chose, unless the employer permitted the employee to choose their own fund. Many employers didn’t like this because it meant more paper work and administration.
It should be understood that not all employees are able to choose their super fund. Broadly, these types of employees are under state awards, state industrial agreements or certain federal industrial agreements. So what must an employer do to offer choice and what happens if they don’t?
You, as the employer, need to select a default fund. This is called the “employer nominated fund” and is the fund that you will make contributions to if the employee does not want to choose one of their own or has not given you adequate details of their choice of fund. This fund must be a complying superannuation fund and meet the minimum insurance requirements. I won’t discuss these concepts here.
When a new employee commences work, you must provide the employee with a Standard Choice Form within 28 days of the day they start work. The ATO publication number is NAT 13080 and this can be filled in on-line on the ATO website or you can order them by phone from the ATO. For contractors and seasonal workers, you only need provide the form once when they start with you. Whenever you engage them again you can refer to the form they originally completed.
The fund the employee chooses must be a complying fund. You are able to rely on written confirmation from the trustee of the fund that it is complying.
So what happens if you don’t do this? As you would expect, there are penalties. You may be liable for a “choice liability”. The choice liability applies when you have paid super contributions to a fund that has not been chosen by your employee or you have not give them a Standard Choice Form within the 28 day period mentioned above. The choice liability is part of the superannuation guarantee charge and is a maximum of $500 per employee per quarter. This amount is not tax deductible.
An employee can choose a fund as often as they want but an employer is required to only accept one choice every 12 months. Further, there is no requirement to give out Standard Choice Forms every 12 months to employees that have already filled in a form when they started with you.
When an employee starts employment I suggest that you have a checklist of items that are “ticked off” that is part of your employee induction process. One of the items should be the provision of a Superannuation Fund Choice form. I also suggest that you have the employee sign something to say that you have given them this form.