Are your employees eligible for Choice?
Not all employees will have a choice. Generally, the main groups Choice of Fund applies to are as follows:
- Employees covered by Federal awards
- Employees covered by State awards now known as a 'notional agreement preserving awards'
- Employees covered by other awards or agreements that do not require superannuation support
- Employees not covered by any award or registered agreement.
Choice of Fund generally will not impact upon employees who are:
- Covered by a Certified Agreement or Workplace Agreement which specifies the superannuation fund into which contributions must be paid
- Covered by an industrial agreement registered by a state award which specifies the superannuation fund into which contributions must be paid (these are agreements made under State Industrial law bound by a constitutional corporation immediately before 27 March 2006 and are known as Preserved State Agreements)
- Covered by an industrial agreement which speciefies the superannuation fund into which contributions must be paid
- Members of certain Defined Benefit Funds
- Members of certain Public Sector Funds
- Covered by a State Award where the employer is not a constitutional corporation (excluding unincorporated employers in Victoria and the Territories).
For an easy guide to who is affected by choice, use this Choice of Fund map.
Providing a Standard Choice Form
You are obliged to provide a Standard Choice Form to new employees who are eligible to make a choice within 28 days of them commencing employment.
You are also oblidged to provide a Standard Choice Form within 28 days if:
- Existing emploees who are eligible for Choice request a form, providing they haven't made such a request in the previous 12 months
- You become aware that an employee has chosen a fund that is no longer a complying fund, or
- An employee is a member of the default fund and you change the default fund.
Employees will be able to use the Standard Choice Form to nominate the superannuation fund into which they want their Superannuation Guarantee payments to be paid.
Employees who have exercised Choice can change their nominated fund once a year and are required to notify their employer each time.
Once an eligible employee elects a complying superannuation fund, any contributions payable after 60 days must be paid to the elected fund.
The frequency of the contribution payments may depend on an industrial arrangement or requirements of the nominated fund.
While contributions are normally required to be paid within 28 days of the end of each quarter, many funds and industrial agreements may require contributions to be paid on a monthly basis.
Providing a default fund clause in a Workplace Agreememt
The Choice of Fund legislation provides an opportunity for employers to specify a fund for their employees through inserting a superannuation clause into a new Workplace Agreement. For more details on how to do this, please call your Relationship Manager in your State or Territory.
Employees in workplaces currently covered by Certified Agreements, Australian Workplace Agreements or industrial agreements registered by a State Award (Preserved State Agreements) that specify the superannuation fund into which contributions must be paid, will however continue to be exempt from Choice of Fund.
Record Keeping
Employers are required to maintain records showing their compliance with Choice of Fund.
Your records should include:
- Details of employees who do not have to be offered Choice. For example, an employee who is not eligible for Choice because you must contribute under a provision of their Certified Agreement.
- Confirmation that the employer’s default fund meets the insurance requirements. This could be a copy of the Product Disclosure Statement provided by the fund, or a record of a telephone conversation with an authorised representative of the fund.
- Details showing that the Standard Choice Form has been provided to all employees eligible for Choice of Fund. For example, you may issue the Standard Choice Form by email and keep copies of the emails.
- Copies of information each employee provides when they nominate their chosen fund.
- Receipts or other documents issued by the fund showing that you have made superannuation guarantee contributions for each eligible employee to their chosen fund.
Your Choice of Fund records must be in English and be kept for five years.
For more information
For further details of the record-keeping requirements under Choice of Fund contact the Australian Taxation Office.
Source: Australian Taxation Office
Penalties
Employers who do not meet their Choice of Fund obligations may be liable for the Choice Shortfall. This is a financial penalty that forms part of the Superannuation Guarantee charge.
When does the penalty apply?
The penalty applies where you have paid Superannuation Guarantee contributions to a complying fund for your employee, but not to the fund your employee has chosen. It may also apply if you have not given your employees a Standard Choice Form within the required timeframe.
How much is the penalty?
The Choice Shortfall is roughly 25% of the contributions paid to the wrong fund, up to a limit of $500 for a notice period per employee.
For example, if your Choice Shortfall for an employee for a quarter is $1,000, the actual shortfall can be no more than $500.
How to avoid the penalty
To avoid the Choice Shortfall it is essential you pay sufficient contributions to the employee's chosen fund. Or, where no chosen fund exists, to the fund you identified as the employer default fund on the Standard Choice Form.
What is a notice period?
Your notice period for an employee starts:
- On the day you first employ an employee, or
- When the preceding notice period has ended.
A notice period will end once the Australian Taxation Office gives you written notice that the notice period for the employee has ended. A notice period can consist of multiple quarters.
Source: www.superchoice.gov.au/employers