Super fund choice, stapled funds and employer obligations

To notify you of their choice, your employees need to complete the Australian Taxation Office’s (ATO’s) Superannuation Standard Choice Form or an alternative document that covers the same information and return it to you. Alternatively, the form can be completed online via ATO online services linked to myGov. 

By law, you are required to give staff members who are eligible to choose a fund a Superannuation Standard Choice Form or a compliant alternative within 28 days of: 

• The employee commencing work
• Changing the default fund into which you pay their contributions
• The employee requesting a form, unless they have made a choice within the previous 12 months
• Becoming aware the fund you are contributing to will not accept your contributions for the employee or has ceased to be a complying fund.

You do not have to provide a choice form when:

• The employee is a temporary resident
• The fund you contribute to for the employee has its members transferred to another fund via a successor fund transfer (SFT).

Employees whose fund is undergoing an SFT are still eligible to choose a fund (unless excluded by another eligibility rule), but the obligation to provide a choice form at the time of the SFT has been removed to reduce complexity for employers. Such employees rarely make an active super choice and so the requirement to automatically provide them with a choice form was removed in 2015. If such an employee requests a choice form, you should provide it.

Onboarding new employees

If a new employee does not choose their own super fund, you need to pay their super contributions to their stapled super fund if they have one.

Your payroll or onboarding software can be used to request stapled super fund details from the ATO as soon as employment has been confirmed via a completed TFN declaration from your new employee. The system should then display the stapled fund and your default fund so the employee can make an informed decision about their super arrangements, knowing where their contributions will go if they don’t make a choice.

If your software doesn’t provide a link to the ATO for stapled fund requests, you can submit a request manually using ATO online services for business.

Your employee can then use the standard choice form (or equivalent integrated into your onboarding software) to notify you of their chosen fund or select your default fund.

If the employee doesn’t make a choice, you must pay their contributions to the stapled fund. If an employee who has not made a choice doesn’t have a stapled fund, your contributions should be paid to your default fund.

If the fund you need to contribute to is a self-managed super fund (SMSF), you will need to obtain the electronic services address and bank account details from your employee.

When contributions you were required to send to a stapled fund are rejected, you can ask the employee to choose an alternative or send an alternate stapled super fund request to the ATO, indicating you were unable to contribute to the previously notified fund. The ATO may be able to provide an alternative stapled fund for contributions. If there is no alternative stapled fund and the employee doesn’t make a choice, you can send contributions to your default fund.

On-time contributions are a priority. Don’t delay contributions beyond the due date while waiting for an employee to make a choice.

Recordkeeping for super fund choice

For employees eligible to choose which super fund they want you to pay into, you will need to keep:

• A record showing you have offered the eligible employee’s choice
• Copies of the written information provided by an employee nominating their chosen fund (the completed standard choice form or equivalent).

For employees who aren’t eligible to choose their fund, keep records of:

• Why employees haven’t been offered a choice
• Which employees you don’t have to offer a choice of super fund to.

You will also need to keep records to confirm that:

• Your nominated (default) fund offers a MySuper product
• The super fund complies with superannuation law.

These records need to be kept for five years from the employee’s start date or five years after the employee is offered, chooses or changes their choice of fund.

When your employee gives you a completed choice form, you don’t need to forward it to the ATO or your employee’s chosen super fund. The form simply acts as an official notification to you of where your employee wants their super contributions paid.

Acting on an employee’s choice

Once an eligible employee advises you of their chosen super fund, you must start paying super contributions into that fund within two months of receiving a valid choice. The only exception is if the employee has made another choice within the previous 12 months – in this case, you may commence paying the new fund if you wish, but it is not compulsory.

If you don’t pay your employee’s super contributions into their chosen super fund, the ATO will penalise you for not complying with super law. Failing to meet your choice of fund obligations means you are liable to pay a choice liability for your employee.

You must not charge your employee a fee if they want to change super fund, or for making SG contributions to their super fund.

Passing on your employee’s TFN

Another important obligation to fulfill when setting up an employee’s super contributions is to provide the super fund you will be contributing to with their tax file number (TFN).

You must do this when you make the first super contribution for the employee, or within 14 days of receiving their TFN if it was not available at the time of your first contribution.

The ATO uses the registered TFN on super accounts to link membership with the correct person and track their super contributions. A missing TFN could mean the ATO can’t verify you have paid contributions on time and lead to additional tax on contributions for your employee.

Employer beware: Giving financial advice to employees

There are strict rules about giving advice or product recommendations for financial products like super funds, so be careful when you talk to your employees about superannuation.

You are permitted to provide your employees with factual information about:

• Why they need to choose a super fund
• The process of choosing a super fund
• Your obligations as an employer
• How they nominate a super fund as their chosen fund.

Your onboarding software can include advertising only for your default fund, your employees’ stapled fund and MySuper products that have passed the most recent performance test.

You can’t make recommendations or give advice to employees about which super fund they should choose or provide a product disclosure statement (PDS) for any fund other than your default and your employee’s stapled fund.

If they need more information, you can direct employees to government websites such as the Australian Securities & Investments Commission’s (ASIC) Moneysmart or some of the detailed information on the SuperGuide website.