CHOICE OF FUND - YOUR OBLIGATIONS AS AN EMPLOYER

Author: Adrian Raftery Wawrzyniak Chartered Accountants, Publish Date: December, 2004

From 1 July 2005, ‘choice of fund’ legislation will give most employees the opportunity to choose the super fund where their Superannuation Guarantee (SG) contributions will be made.

Who will be affected?

Generally, choice of fund will apply to all employees that have compulsory SG contributions made on their behalf unless they are:

• Subject to legislation, state awards, workplace agreements or certified agreements that specify where their SG contributions must be made; or
• Federal government employees that have their SG contributions made to the Commonwealth Super Scheme, Public Super Scheme or under the Superannuation (Productivity Benefits) Act 1988; or
• Members of a defined benefit scheme and their benefit entitlement will increase as a consequence of exercising choice of fund.

How do employers comply with choice of fund?

If choice of fund applies, an employer must provide a standard choice form to each employee before 29 July. For new employees commencing employment after 1 July 2005, employers must provide a standard choice form within 28 days of the employee starting work unless the employee has chosen a fund prior to the 28th day.

What is a standard choice form?

A standard choice form must be in writing and contain:

• A statement that the employee may choose any eligible choice fund (ie a regulated super fund); and
• The name of the fund the employer will contribute to if the employee does not make a choice; and
• Other information as required by the regulations (yet to be released).

When is an employee’s choice of fund effective?

The choice of fund becomes effective two months after the date the employee has given the employer written notice of the choice (or earlier if you agree).

Can an employer refuse a super fund?

Yes, if an employee has chosen another super fund in the previous 12 months, or if the employee does not provide written confirmation of:

•  Super fund contact details; or
• A statement that the super fund will accept contributions; or
• Other prescribed information (yet to be released).

What if an employee does not exercise choice?

Then the employer must make the employee’s SG contributions to an eligible default choice fund. The default choice fund must offer insurance cover.

What are the penalties for not complying with choice?

If an employer does not comply they will be subject to a maximum penalty of $500 per employee per quarter.

Is there anything else I should consider?

You may need to revisit your default choice fund, and see whether you are getting a good deal on fees, investment choices, and benefits for your employees, and to make sure insurance cover is included as required by the legislation. It is always best to ask a qualified financial advisor to check whether this is the case, or for any other questions you may have in relation to the new legislation.

Disclaimer:

The advice contained herein is general securities advice only. It has not been prepared taking into account your particular investment objectives, financial situation and needs.

You should assess whether the advice is appropriate to your individual investment objectives, financial situation and particular needs. You should do this before making an investment decision based on the general securities advice. You can either make the assessment yourself or seek the help of a professional adviser.

FURTHER INFORMATION 

This information is provided courtesy of Imperator Financial - Australia's financial  information and financial planner referral service. They can be contacted on 1300 788 501 or visit their website at www.imperator.com.au.