Are you ready for super choice ASIC Report

  • Date:01 Jun 2005
  • Type:CompanyDirectorMagazine
Is your company ready for the new Australian government "‘choice of superannuation fund" initiative that starts from July 1? Hopefully, you’ve already received details from the Tax Office and seen the ads in the newspapers.

Are you ready for super choice?

By Delia Rickard, deputy executive director, Consumer Protection Directorate,

Australian Securities and Investments Commission (ASIC).

Is your company ready for the new Australian government "'choice of superannuation fund" initiative that starts from July 1?

Hopefully, you've already received details from the Tax Office and seen the ads in the newspapers.

This new law allows certain employees to choose which superannuation fund or retirement savings account they want their employer superannuation guarantee contributions made to.

As a director, you're responsible for ensuring your company complies with the new law. In this article, we briefly outline your obligations as an employer, but read the Tax Office's Choice of Superannuation Fund - Guide for Employers, or visit www.superchoice.gov.au for more details.

Work out which employees are eligible

As an employer, the first thing you need to do is to identify which of your employees are eligible for choice.

The best way of doing this is to visit the Government's super choice website which provides detailed information to assist employers and employees on the question of eligibility. Or you can call the information line on 13 28 64.

If you don't have any employees eligible for choice of superannuation fund, you don't have to do anything except keep appropriate records, and remember to check the eligibility of any new staff.

If your company already offers employees an unrestricted choice of superannuation fund, the Government has announced changes to the law that, if passed, will mean that you don't need to offer choice again to employees that have already chosen a fund.

Identify your employer fund

You'll also need to identify a superannuation fund into which you'll make superannuation guarantee contributions for those employees who don't choose a fund. This is called the "employer fund" and must be either a complying superannuation fund or a retirement savings account.

For many employers, the employer fund is likely to be a superannuation fund that they already contribute to. You must nominate a fund for each eligible employee, but the fund does not need to be the same for each employee. However, you cannot have more than one fund per employee.

The employer fund must offer a minimum level of life insurance (with some transitional exceptions). One of the transitional rules allows you to continue to contribute to your existing superannuation fund, even if it does not meet the insurance requirements, until 30 June 2008.

Provide the standard

choice form

You must give each eligible employee a Standard choice form (you'll need to complete Part A of the form first). The Standard choice form:

  • gives an eligible employee details of your employer fund
  • contains information for an eligible employee to help them decide what to do
  • allows an eligible employee to notify you of their chosen fund (for those that want to choose their own fund.)
You must give the Standard choice form to your existing eligible employees before 29 July 2005.

For eligible employees you employ after 1 July 2005, you must give them the Standard choice form within 28 days of them starting work.

For more details and for copies of the Standard choice form, visit the super choice website, www.superchoice.gov.au or ring 13 28 64.

Providing other information

You can give the facts to an employee about:

  • what choice of superannuation fund is
  • your obligations as an employer, and
  • how they can nominate a superannuation fund.
But giving advice about which fund to choose or recommending that their super be consolidated into one account could be considered financial advice and therefore require an Australian Financial Services Licence (AFSL) from ASIC. So if you don't have an AFSL, be sure to avoid giving your employees this sort of advice.

The Government has produced a new, free booklet, prepared by ASIC, called Super Choices to help employees make decisions about their superannuation. Copies are available from www.superchoice.gov.au or by calling 13 28 64.

Act within two months

If an eligible employee chooses a fund and has provided you with all the required information, your company must contact the chosen fund and be ready to make any superannuation guarantee contributions to the chosen fund on behalf of that employee two months after receiving their choice.

If an eligible employee doesn't choose a fund, your company must contribute to the employer fund - the employee doesn't have to fill out or return the Standard choice form.

There is no time limit for employees on making a choice of fund.

Comply to avoid penalties

If you don't meet your choice of superannuation fund obligations, your company may be liable for the "choice shortfall", which forms part of the superannuation guarantee charge. The choice shortfall applies where the employer has:

  • paid superannuation contributions to a complying fund but did not offer eligible employees a choice
  • paid an employee's superannuation contributions to a complying fund but not their chosen fund, or
  • made contributions to a fund other than the employer fund for eligible employees who have not chosen a fund.
The choice shortfall is usually 25 percent of contributions that are paid to the wrong fund, but is limited to $500 for a notice period per employee. Your notice period for an employee will start:
  • when choice of superannuation fund starts on 1 July 2005
  • on the day your first employ an employee, or
  • when the preceding notice period has ended (this occurs when the Tax Office gives you a letter, saying the notice period has ended).
The Tax Office recognises that most employers will support choice of superannuation fund and make a genuine effort to meet their obligations within the timeframes required. It also understands that some employers may initially have difficulty in fully understanding and meeting their new obligations, and may make mistakes despite a genuine effort to comply.

During the first year of the new system, the Tax Office will focus on ensuring that employers are aware of, and understand, their new obligations. Its penalty reduction policy during this period will also take into account the problems associated with putting new arrangements into practice.

To find out more

To find out much more about your obligations for choice of superannuation fund, read the Choice of Superannuation Fund - Guide for Employers and visit www.superchoice.gov.au. Download the guide from the super choice website or from www.ato.gov.au.

If your employees want more information about or help with making decisions about their superannuation, they can download the booklet from www.superchoice.gov.au or request free copies by calling 13 28 64.

Additionally, they can visit ASIC's consumer website, FIDO at www.fido.gov.au for lots more information about superannuation and money matters in general.

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