Rules for setting up super and choice of fund for new employees

When a new employee starts working for you, in most cases you must allow them to choose the super fund into which you pay their Super Guarantee (SG) contributions. Existing employees who are eligible to choose a fund can also direct you to change the superannuation fund you make contributions to for them.

While the new rules extending the number of employees with the right to fund choice have simplified some aspects of employee super, it’s not all clear sailing.

Not only do you still have to identify eligible and ineligible employees, but you must now also get details of a new employee’s ‘stapled fund’ from the ATO if they don’t make a choice when they commence employment.

Who is eligible to choose their fund?

These days, most employees get to choose their own super fund for the SG contributions you make on their behalf, unless they are considered ineligible to make a choice.

Employees who are NOT eligible to make a choice are those who are:

• Employed under an enterprise agreement or workplace determination made prior to 1 January 2021 that names the fund to which contributions must be paid
• Holding a temporary visa (temporary residents)
• Employed under an old workplace agreement that requires super support, including a pre-reform certified agreement, an AWA, a collective agreement, an old Industrial Relations agreement, or an Individual Transitional Employment Agreement (ITEA)
• Employed under a State award or registered agreement
• Federal or State public sector employees excluded from choice by law or regulation (such as members of the CSS, PSS or unfunded public sector schemes)
• Members of a defined benefit fund that would continue to accrue benefits if contributions were paid to an alternative fund or where the maximum benefit has been accrued

Source: Superannuation Guarantee (Administration) Act 1992

When you’re dealing with a new employee, they will generally be eligible for choice of fund unless you are using an enterprise agreement that specifies a super fund and was made prior to 1 January 2021, they are on a temporary visa, or you are a government employer using a public sector scheme that excludes choice. The remaining categories not eligible for choice refer to older employment arrangements that may apply to longstanding employees in limited circumstances.

If you are uncertain what award or industrial agreement covers your new employee, check the Fair Work website or the workplace relations department in your state or territory.

When you must give employees a choice form