Having new employees start working for you should be exciting, and we hope to make your superannuation administration easier.

As an employer, there are three steps you need to follow (under Choice of Fund legislation), in order to meet your obligations when a new employee starts work. Choice of Fund legislation affects where you contribute Superannuation Guarantee (SG) contributions to.

Step 1

Check whether the new employee can choose their own fund

Not everyone is eligible to choose a superannuation fund, see the criteria below. It generally depends on the type of award or industrial agreement that you employ them under.

Who is eligible to choose a superannuation fund?

An employee can generally choose their superannuation fund if they are:

• employed under a federal award
• employed under a former state award, now known as a ‘notional agreement preserving state award’
• employed under a state award or industrial agreement that doesn’t require superannuation contributions
• not employed under any state award or industrial agreement (including contractors paid principally for their labour).

Who is not eligible to choose a superannuation fund?

The circumstances in which an employee may not be eligible to choose a superannuation fund include:

• you pay superannuation for them under a state award or industrial agreement or under certain federal workplace agreements, including an Australian Workplace Agreement (AWA) and collective agreements (although choice can also be provided under these awards or agreements)
• you pay superannuation for them under an award or agreement that stipulates a superannuation fund that contributions must be paid to
• they’re in a particular type of defined benefit fund or they’ve already reached a certain level in a defined benefit fund.

Some federal and state public sector employees are also excluded from choice of superannuation fund.

Step 2

If your employee can choose their own superannuation fund, you will usually need to provide a Standard choice form (within 28 days from the day they started working for you). If a new employee decides they don’t want to nominate a fund, they don’t need to complete the form.

If your employee does not choose a superannuation fund, you must pay their superannuation contributions into the fund you have identified as your employer nominated fund (also known as your default fund).

Please note, from 1 July 2008, your employer nominated fund must offer minimum life insurance (death cover) for members.

You also have to provide a Standard choice form within 28 days in other circumstances including if:

• an existing eligible employee asks you for a form (but note that you don’t have to accept more than one choice of fund every 12 months)
• you are unable to contribute to an employee’s chosen fund, or it is no longer a complying fund
• you change your employer nominated fund.

Tip: Make sure the Standard choice form includes your employee’s Tax File Number so that higher tax doesn’t apply to any contributions you pay for them.

Step 3

Act on your employee’s choice

Once an employee chooses a superannuation fund, you have up to two months to arrange to pay their contributions into that fund.

However, you must start paying an employee’s superannuation contributions to your employer nominated (default) fund, if required in order to meet your superannuation obligations, where:

• an employee has not chosen a fund after providing them with a Standard choice form, or
• you have not accepted their choice of fund because they have not yet provided all the information you need.

If you don’t meet your obligations, including paying your employee SG contributions to the correct fund, you may face penalties.

Please refer to the ATO website for more information about your obligations as an employer under Choice of Fund legislation.