Choice of Super - How Does It Affect Business?
The Federal Government's Superannuation legislation (Choice of Superannuation Funds) Act 2004 commenced on July 2005. This law primarily affected those businesses operating under Federal Awards and required them to offer a choice of superannuation fund to all existing and new empoloyees.
Employers already complying with an obligation to make superannuation contributions under :
- a State Award;
- a Certified Agreement or;
- an Australian Workplace Agreement.
were not required to implement the choice of fund requirements.
More recently, the Federal Government has announced changes to Workplace Relations Regulations making it a requirement for incorporated businesses operating under State Awards to also offer choice to employees from 1 July 2006.
This new law only applies to corporations and will not affect businesses which are not incorporated and which have been complying with an obligation to make superannuation contributions under a State Award or Agreement.
For those incorporated businesses affected by the new law, the requirement is to provide NEW employees with a Standard Choice Form on commencement. A form is to be given to an existing employee on request
(in July 2005, employers were also required to give Standard Choice forms to all existing employees).
If a business is unsure about whether it is required to offer choice of superannuation to employees, it should contact its employer organisation, or the Australian Taxation Office on 13 28 64 for advice.
An incorporated business?
If your business is incorporated and operates under a State Award, it will now be required to offer choice of superannuation to employees.
What will need to happen?
From 1 July 2006, all new employees are to be given a Standard Choice Form on commencement. Existing employees to be provided with a Standard Choice Form on request.
New employees to be given a Standard Choice Form within 28 days of commencement.
An employer must provide an employee with a Standard Choice Form within 28 days of a written request being received.
Standard Choice Form
The Federal Government has released a Standard Choice Form.
Part A is the information an employer is required to give to employees.
Part B lists the information an employee is required to give an employer.
An employee must provide an employer with the following information when choosing a super fund : -
- details of the employee's chosen fund and account information (if currently a member);
- evidence that it is a complying fund and will accept employer contributions;
- details of how an employer can make contributions.
It is possible that an employee's advice about choice will come in the form of a pre-completed form provided by their chosen fund. These forms will generally feature a statement from that Fund that it meets all Choice requirements. One of these employee choice forms nominating Tasplan is nominating Tasplan is available by clicking here.
 Acrobat Reader required to view download documents
If Tasplan is the Employer Fund nominated by your business but employees are offered Choice, use this Form. It includes Tasplan details in Part A.
As issued by the Australian Taxation Office.
As issued by the Australian Taxation Office
How long has an employer got to process a Choice form?
Following the commencement of the new law, a business will have to process a Choice form and commence employer contributions into the nominated fund within two months.
What if an employee doesn't make a choice?
Where an employee has not nominated a fund, or the employer does not accept the employee choice advice (it may not contain all of the necessary information about the selected fund or the employer is unable for some reason to contribute to that fund) a business will pay the super contribution to an Employer fund in order to satisfy the employer's Superannuation Guarantee obligation successfully.
What is an Employer Fund?
Generally, the Employer fund can be any complying superannuation fund chosen by the employer, provided it offers life insurance of a kind specified in the regulations. The Employer fund will generally be one that is nominated in the applicable award - unless for some reason a business nominates another Employer fund.
How often can employees make a choice?
Once an employee has made a choice, a further choice cannot be made for 12 months - unless by agreement with the employer. Note that if an employee does not exercise choice and their contributions are paid into an Employer fund, this is not deemed to be a choice and they are able to make a selection at any time.
How does an employee make a choice?
An employee must provide an employer with written information (refer Standard Choice Form) about the Fund they have chosen. What if an employee fails to provide all of the prescribed information about their chosen fund?
An employer can process a Choice advice even when an employee has failed to provide all of the information listed in Part B of the Standard Choice Form. However, where there is any uncertainty as to whether a chosen fund is a complying fund, make sure that a Compliance Statement from the fund is provided.
What happens if an employer fails to meet Choice obligations?
If a business fails to comply with the choice of fund requirements it will incur a (non tax deductible) penalty.
The penalty is calculated as 25% of the contributions shortfall up to a maximum of $500 per employee per notice period.
What records does an employer need to keep?
Employers affected by Choice must maintain records to show that they have met their choice of superannuation fund obligations. This includes : -
- Details of employees who haven't been offered choice and a record of the reason;
- A record to show that existing (and new) employees have been offered choice;
- Written information provided by the employee when they make their choice; and
- Evidence that the employee's chosen fund is complying and meets the insurance requirement.
Records must be in English and kept for a period of 5 years. If records are in some electronic form (ie on disc) they must be in a form that is readily accessible and easily converted to written English. Records can be in the form of email.
Remember, where a Choice form is not returned and contributions are made to the Employer 'default' fund, there is likely to be NO record of choice so it is important an employer can prove that an original offer was made.
Tasplan – A Complying Fund
Tasplan is a complying fund and an eligible choice fund which satisfies the minimum insurance requirements of choice of super legislation. A copy of Tasplan's Compliance Statement can be printed for record - keeping purposes by clicking here. Self Managed Super Funds (SMSF)
An employee is permitted to choose an SMSF, but employers should ensure that all of the required information in Part B of the Standard Choice Form is provided.
What Can I Do To Limit The Administrative Burden On My Business?
A Certified Agreement which specifies a limited number of 'agreed' superannuation funds is one method that has been used to limit the number of Funds to which an employer may be required to contribute. Alternately, an employer may also consider an Australian Workplace Agreement which specifies an agreed fund (seek advice from your industrial relations adviser).
Employers may also find that by nominating the Fund/s in the relevant award as the Employer (Default) Fund, this could help to reduce the number of choices that might otherwise be made by employees. In other words, many employees are likely to stay with their current fund.
Finally, an employer might make Choice a 'condition of employment' and incorporate it as part of the recruitment process. An employee, for example, might be required to return their Choice form with their signed acceptance of employment.
Note: In some workplaces, not all employees are covered by the same award. Ensure that any review of your Choice obligations includes consideration of the employment arrangements of each and every one of your employees.
Call 1800 005 166 for a Tasplan Client Service Manager to visit your workplace and provide a presentation or answer questions about Choice.
Further information about choice of fund can be obtained from the Australian Taxation Office website www.ato.gov.au then follow the path of: For Business -> Super essentials -> Advanced topics -> Super topics explained |
