• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SuperGuide

Superannuation and retirement planning information

  • SuperGuide Premium
  • Account
  • Log In
  • SuperGuide Premium
  • Account
  • Log In
  • How super works
    • Super for beginners
    • Super rules
    • Employers guide to super
    • Super contributions
    • Super and tax
    • Accessing super
    • Super news
    • Women and super
    • Super tips and strategies
    • How-to guides
    • Super quizzes
    • Superannuation Q&As
    • Superannuation glossary
  • Super funds
    • Best performing super funds
    • Super fund rankings
    • Best performing pension funds
    • Pension fund rankings
    • Super fund average returns
    • Super investing strategies
    • Comparing super funds
    • Choosing a super fund
    • Choosing an investment option
    • Super fund fees
    • Insurance and super
    • Super fund profiles
  • SMSFs
    • SMSFs for beginners
    • SMSF administration
    • SMSF checklists
    • SMSF compliance
    • SMSF investing
    • SMSF pensions
    • SMSF strategies
    • SMSF Q&As
  • Plan your retirement
    • Retirement planning for beginners
    • When should I retire?
    • How long will I live?
    • How much super do I need?
    • Will I get the Age Pension?
    • How much will I spend in retirement?
    • Financial advice
    • Retiring overseas
    • Preparing for retirement
    • Retirement planning strategies
    • Retirement calculators and reckoners
  • In retirement
    • Income in retirement
    • Super lump sums
    • Super pensions
    • Age Pension
    • Working in retirement
    • Life in retirement
    • Senior concessions and services
    • Aged care
    • Estate planning
    • Super death benefits

Home / How super works / Employers guide to super / What are the rules when offering choice of super fund to a new employee?

What are the rules when offering choice of super fund to a new employee?

November 13, 2020 by Janine Mace Leave a Comment

Reading time: 4 minutes

On this page

  • Who is eligible to choose their fund?
  • Get your paperwork right for new employees
  • Choice of fund rules and obligations for existing employees
  • Recordkeeping and your Standard Choice Forms
  • What to do next
  • Passing on your employee’s TFN
  • Employer beware: Giving financial advice to employees
  • Handling salary sacrifice requests

When a new employee starts working for you, in most cases you must allow them to choose into which super fund you pay their Super Guarantee (SG) contributions.

But as an employer, there are some important rules and deadlines you need to be aware of when it comes to setting up super contributions for your newest member of staff.

Here’s a simple guide to offering choice of super fund and making sure you start on the right side of the rules.

Who is eligible to choose their fund?

These days, employees generally get to choose their own super fund for SG contributions unless they are considered ineligible to make a choice.

In most cases, ineligible employees are workers employed under an enterprise agreement (EA) or award that specifies the super fund their SG contributions must be made into, or they are members of certain defined benefit funds, or are state and federal government employees.

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.


Advertisement
SuperGuide Premium is ad-free

For more information, read SuperGuide article Selecting your super fund: Can I make the choice?


Expansion of fund choice from 1 January 2021

New legislation giving more employees the right to choose the super fund receiving their employer contributions passed Parliament on 25 August 2020.

Under the new Treasury Laws Amendment (Your Superannuation, Your Choice) Bill, the choice of fund rules will apply to employees covered by workplace determinations and EAs made on or after 1 January 2021.


Get your paperwork right for new employees

When new employees join your business, in most cases they are eligible to choose their own super fund. Provided their choice complies with super law and you receive all the necessary information, you must pay contributions into their chosen super fund.

To notify you of their choice, your new employee needs to complete the ATO’s Standard Choice Form and return it to you as soon as possible. (Super law also allows them to nominate their chosen fund in writing, provided they give you all the required information.)

By law you are required to give new staff members a Standard Choice Form within 28 days of commencing work, unless they give you details of their chosen fund first. For more information, read SuperGuide article The Superannuation Standard Choice Form explained. If your new employee doesn’t nominate a super fund, you must pay their SG contributions into your business’s default super fund.

For more information, read SuperGuide article Choosing a default fund for your employees.


Important

If your new employee is not a member of the super fund they nominate as their chosen fund, you should not make contributions into the fund until the employee joins. It is the employee’s responsibility to ensure they are properly registered with their chosen fund.

If the employee has not joined by the next payment date, you should pay the required super contribution into your default super fund.


Choice of fund rules and obligations for existing employees

Your existing employees also have the right to choose their own super fund and there are rules you need to follow:

  1. An employee can notify you of their nominated super fund at any time, even if they failed to select a super fund when they first started with you.
  2. To formally notify you of their nominated super fund, an employee must fill out a Standard Choice Form and return it to you. 
  3. If an employee asks for a Standard Choice form, you are required to provide it to them within 28 days.
  4. There is no limit to the number of times an employee can request a change to their nominated super fund, but you are only required to accept a new choice from the employee once every 12 months.
  5. You must provide a Standard Choice Form to an employee if you change your default fund and you are currently paying their super contributions into that fund.
  6. If you are unable to contribute to your employees chosen fund – or if it stops being a complying super fund – you are required to give your employee a Standard Choice Form within 28 days.

Recordkeeping and your Standard Choice Forms

Under super law, you must keep a copy of each Standard Choice Form you receive for five years.

When your employees give you a completed Standard Choice Form, you do not need to forward it to the ATO or your employee’s chosen super fund. A Standard Choice Form simply acts as an official notification to you of where your employee wants their super contributions paid.

Compare super funds

Read more...

Advertisement

Employers are required to make SG contributions for their eligible employees by the quarterly due dates. But if your employee hasn’t chosen a super fund – or provided you with all the necessary information – you are still required to pay the contribution by the due date into your default super fund.


Super tip

The Fair Work Act requires you to keep your employees informed about the super contributions you make on their behalf and you are obliged to include super contribution amount on their pay slips.


What to do next

Once an employee advises you of their chosen super fund, you must commence paying super contributions into that fund within two months of receiving a valid choice.

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.

For more information, read SuperGuide article Are you meeting your employer super obligations: What are the penalties?


Need to know

As an employer, you have several important obligations when it comes to choice of super fund. You must:

  • Offer your eligible employees the choice of super fund
  • Action your employee’s choice of fund within two months of receiving notification of their choice
  • 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 you need to fulfill when setting up an employee’s super contributions is to provide their chosen super fund with their tax file number (TFN).

Once your employee gives you their TFN, you are obligated to provide it to their chosen super fund. 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 for them.

Super funds are unable to accept personal voluntary contributions from employees if they don’t have their TFN. This makes it essential to pass on a TFN if your employee wants to make personal super payments as a payroll deduction.

Advertisement

Need to know

If you do not pass on a TFN to your employee’s chosen super fund in a timely fashion, the ATO may penalise you (currently $2,100).

It’s also your responsibility to ensure any third-party service providers (such as payroll or clearing house services) you engage pass TFNs on to your employees’ chosen super funds.

You must ensure your contract with a service provider allows them to pass on TFNs and that they do so. If they do not pass on a TFN, you will be liable for any ATO-imposed penalties, not them.


Employer beware: Giving financial advice to employees

There are strict rules in place about giving advice or product recommendations when it comes to 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:

  • How choice of fund works
  • The process of choosing a super fund
  • Your obligations as an employer
  • How they nominate a super fund as their chosen fund.

Need to know

Unless you hold a financial services licence (AFSL) from the Australian Securities & Investments Commission (ASIC) to provide financial advice, it is illegal to make recommendations or give advice to your employees about which super fund they should choose.

Likewise, you must not attempt to influence how much they decide to contribute, or if they should consider consolidating their super accounts.


For more about financial advice, read SuperGuide articles:

  • 5-step guide to the different types of financial advice on offer
  • Financial advice through super funds: What’s on offer
  • 7-point guide to what happens when you meet a financial adviser

It’s up to your employee to find out how to join a super fund and get the product information and disclosure statements they need to select the right super fund for their personal situation. Your employees are also responsible for filling out their super fund’s membership application correctly.

If they need more information, you can direct your employees to government websites or some of the detailed information on the SuperGuide website:

  • How super works: A beginner’s guide to superannuation
  • How to compare super funds in 7 easy steps
  • How to read a super fund PDS
  • What are the different types of super funds?
  • What is MySuper, and which super funds are MySuper funds?

Handling salary sacrifice requests

Although you are not permitted to give financial advice to your employees, you can assist them if they would like to implement a salary sacrifice arrangement with you.

Employers are not required to agree to a salary sacrifice arrangement, but if you do permit your employees to make these before-tax payments from their wages, you must ensure you enter into a written agreement.

A written salary sacrifice agreement with your employee must state the terms and conditions of the arrangement and can only relate to future earnings.


Advertisement

When a super fund receives a super contribution from you it doesn’t differentiate between SG contributions and salary sacrifice amounts. So you need to keep records of all your super contributions to ensure they can be properly reported. Salary sacrifice amounts need to be reported on an employee’s annual payment summary as reportable employer super contributions.

For more information, read SuperGuide articles:

  • Salary sacrifice and super: How does it work?
  • How do reportable employer super contributions (RESC) work?
Boost your retirement with a SuperGuide Premium subscription

SuperGuide Premium is your independent expert on superannuation and retirement planning. Learn how much super you could need, what are the best performing super and pension funds, how to run an SMSF, the latest super rates and thresholds, contributions guides, and super rules and strategies.

Includes performance rankings for 235 super funds and 166 pension funds, more than 600 articles, how-to guides, checklists, tips, calculators, case studies, quizzes and a monthly newsletter.

Find out more


Learn more about employer super responsibilities in the following SuperGuide articles:

Quiz: Employer super responsibilities

December 1, 2020

Employee or contractor for super purposes? How to tell the difference

November 13, 2020

How to create an effective salary sacrifice arrangement with your employees

November 13, 2020

Employee super contributions for the self-employed and micro businesses

November 13, 2020

Checklist for employers: 7 tips to help you master your super responsibilities

November 13, 2020

Employer’s guide to Superannuation Guarantee (SG) contributions: Which employees are eligible?

November 13, 2020

Choosing a default fund for your employees

November 13, 2020

Calculating your employees’ SG contributions? The rules to help get it right

November 13, 2020

Related topics

Employers guide to super How super works

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

© Copyright SuperGuide 2009-21. Copyright for this article belongs to SuperGuide Pty Ltd, and cannot be reproduced without express and specific consent. Learn more

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

How super works
Super for beginners
Super rules
Employers guide to super
Super contributions
Super and tax
Accessing super
Super news
Women and super
Super tips and strategies
How-to guides
Super quizzes
Superannuation Q&As
Superannuation glossary
Super funds
Best performing super funds
Super fund rankings
Best performing pension funds
Pension fund rankings
Super fund average returns
Super investing strategies
Comparing super funds
Choosing a super fund
Choosing an investment option
Super fund fees
Insurance and super
Super fund profiles
SMSFs
SMSFs for beginners
SMSF administration
SMSF checklists
SMSF compliance
SMSF investing
SMSF pensions
SMSF strategies
SMSF Q&As
Plan your retirement
Retirement planning for beginners
When should I retire?
How long will I live?
How much super do I need?
Will I get the Age Pension?
How much will I spend in retirement?
Financial advice
Retiring overseas
Preparing for retirement
Retirement planning strategies
Retirement calculators and reckoners
In retirement
Income in retirement
Super lump sums
Super pensions
Age Pension
Working in retirement
Life in retirement
Senior concessions and services
Aged care
Estate planning
Super death benefits
Advertisement
Compare super funds

Kickstart your retirement planning

Try our free 7-day email series on planning your retirement, including how much super you’ll need, when you can retire and a quiz to test what you’ve learned.

Learn more

Footer

Important: Disclaimer

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Learn more

About SuperGuide

SuperGuide is Australia’s leading superannuation and retirement planning website. Learn more

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629

  • Contact us
  • Advertise on SuperGuide
  • Careers

Before using this website

  • New to SuperGuide?
  • Terms and Conditions of Use
  • Financial Services Guide
  • Privacy Policy and Privacy Collection
  • Copyright Policy
  • Editorial Policy and Complaints
  • Disclaimer

  • SuperGuide Premium
  • Subscriber feedback
  • Sitemap