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Superannuation Choice Legislation
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What does Superannuation Choice of Fund
mean for employees
Choice of fund means that eligible employees will be able to
choose the Superannuation fund into which their employer will pay Superannuation
Contributions.
If an employee does not choose an eligible choice fund, then
a default fund (see below) will apply. An eligible choice fund is a
Superannuation fund which complies with Superannuation Legislation (SIS),
offers insurance cover, and accepts employer Superannuation Contributions.
As an alternative, employees can establish their own Self
Managed Superannuation Fund (SMSP), and have their current Superannuation
balance and all future contributions paid into this fund. Employees need to
be aware of the potential advantage and possible pitfalls in establishing
their own SMSP. Contact our office if you are considering this option under
this new Superannuation environment.
Obligations for Employers
Over
the coming months employers in particular will need to prepare for
Superannuation Choice of Fund. Employers have two major obligations to
comply with the choice of fund legislation:
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To provide a ‘Standard Choice Form’ to employees
·
To nominate a ‘Default Fund’.
1. Provide a Standard Choice Form to
employees
Employers
are obliged to provide a Standard Choice Form to:
·
All eligible new employees within 28 days of their
commencing employment.
·
Within 28 days when requested by an eligible employee,
provided they haven’t made such a request in the last 12 months
Employees will be able to use the Standard Choice Form to
nominate the Superannuation Fund they want their Superannuation Guarantee
payments to be paid into. The nominated fund must be an eligible choice fund
into which the employer can legally make contributions.
Employees can change their nominated fund once a year by
notifying their employer each time. Employers are obliged to pay their
Superannuation Contributions into the nominated fund within two months of
notification, provided that the fund chosen satisfies the conditions of the
legislation. It is important to remember that employers are unable to give
advice about which fund an employee can choose (unless the employer holds
an Australian Financial Services Licence).
2. Nominate a default fund
Employers must also nominate a default fund into which an
employee’s Superannuation Guarantee payments must be made if the employee
does not return a completed Standard Choice Form to the employer.
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