What is Choice of Super(annuation)/Fund?
Choice of fund in respect of superannuation is a law that was introduced to give the majority of employees the right to choose which superannuation fund will receive their employer superannuation contributions (i.e., the superannuation guarantee amounts required to be contributed by employers in prescribed circumstances). It has applied since 1 July 2005.
Who Does Choice of Superannuation Affect?
Employers, employees, superannuation funds and their trustees, and financial advisers all have obligations under the choice of fund provisions. The Tax Office (the ATO), ASIC and APRA will jointly be engaged in ensuring that employers comply with their obligations.
Employers
Generally, since 1 July 2005, employers have been obligated to offer choice of superannuation fund to all eligible employees. To meet this obligation, employers need to identify their eligible employees; provide a Standard choice form to their eligible employees; and act on their employees’ choices.
Employers also need to choose an employer fund (default fund) to which they will contribute superannuation guarantee amounts if an employee does not make a choice.
The superannuation provisions regarding portability of member accounts has recently changed so that an existing superannuation account held by an employee must be accepted by a new employer. This measure is designed to minimise the number of non-managed funds held in the name (or some variant of the name) of the employee.
Employees
Generally, since 1 July 2005, employees can choose the fund to receive their future superannuation contributions unless:
- their superannuation contributions are made under a certified agreement or an Australian workplace agreement
- their superannuation contributions are made under a state award or industrial agreement, or
- their employer is a sponsor of a particular defined benefit fund and certain conditions are met.
There will also be public servants and individuals working for government agencies who may not be entitled to be offered choice of fund.
If an employee is engaged under a federal award, they must be offered choice of superannuation fund whether or not that award requires contributions to be made to a specific superannuation fund.
Some state laws also provide for choice of superannuation fund under state based arrangements.
Employees who aren’t sure what award or industrial agreement (if any) they are covered by can find out by:
- asking their employer
- visiting the Workplace Authority website (for federal awards and agreements and links to information on state awards and state industrial agreements), or
- ‘phoning the government agency responsible for workplace relations (in Queensland the agency responsible is Wageline.)
If an eligible employee wishes to choose a superannuation fund, they should provide their employer with all the required information, including verification that the fund nominated is a complying fund under the legislation. The employer does not have to make superannuation contributions to the employee’s chosen fund until all information is provided.
Superannuation Funds Trustees
Superannuation funds can inform employees whether their employer is able to make contributions to the fund on their behalf. If so, funds should provide employees with the information they need to complete the Standard choice form.
Superannuation funds and trustees must also comply with all relevant licensing and disclosure requirements. They must not illegally provide kickbacks to employers for choosing their fund as the employer fund, or engage in misleading or deceptive conduct.
How can Continuum Financial Planners help?
If you have more than one superannuation fund account, if you are considering changing your employment situation, or if you have recently done so and are confused about your options, you should contact us for an opportunity to discuss your options – and to learn how your superannuation should be managed as part of a broader wealth accumulation strategy. Your first meeting with one of our experienced financial advisers will be at our cost. You can also make meeting arrangements with one of our advisers by phoning our office on 07-3421 3456.
Acknowledgement: we appreciate the contribution of the substantial portion of this article as was extracted from the Deutsche Asset Management’s sponsored Desk Caddie.
History: This article was first posted in December 2009: it has been occasionally refreshed/ updated, most recently, in July 2021.
