Choice of fund

Most employees are eligible to choose a super fund to receive super guarantee contributions. Your employee is entitled to choose their own fund if they are:

• employed under a federal award
• employed under a former state award, now known as a 'notional agreement preserving state award' (NAPSA)
• employed under another award or industrial agreement that doesn't require super support
• not employed under any state award or industrial agreement (including contractors employed wholly or principally for their labour).

Some state laws also provide for choice of super fund under state- based arrangements.

Your employee may not be eligible to choose their super fund if: you are required to pay super contributions:

• their super is paid under a state award or registered agreement;
• their super is paid under certain workplace agreements made before 1 January 2021 that require super support, including some Australian workplace agreements (AWA);
• they are a federal or state public sector employee, excluded from super choice by law or regulations;
• they are in a particular type of defined benefit fund or have already reached a certain level of benefit in that super fund.

A ‘sta­pled’ fund is ef­fec­tively an em­ploy­ee’s su­per fund that fol­lows them from job to job un­less they ac­tively choose an­other fund.

For a fund to be ‘sta­pled’ it must be a com­ply­ing su­per fund or a Re­tire­ment Sav­ings Ac­count (RSA) which can ac­cept super con­tri­bu­tions made on be­half of an em­ployee, and the em­ployee must be a mem­ber of the su­per fund or hold the RSA.

Tie-breaker rules will de­ter­mine an em­ploy­ee’s 'sta­pled' fund where an em­ployee has two or more funds that meet these ba­sic re­quire­ments.

Em­ploy­ers will be able to iden­tify a new em­ploy­ee’s 'sta­pled' fund by log­ging onto ATO on­line ser­vices and en­ter­ing the em­ploy­ee’s details.

Where the ATO iden­ti­fies mul­ti­ple funds that may be 'sta­pled' to an em­ployee, four-step tiebreaker rules ap­ply inac­cord­ing to the fol­low­ing or­der.

1. The most re­cent fund iden­ti­fied by the ATO will be the em­ploy­ee’s 'sta­pled' fund for the se­lected pe­riod (from the start of the pre­vi­ous fi­nan­cial year un­til the day when the ATO ap­plies tiebreaker re­quire­ments).
   
   
2. If 1. does­n’t ap­ply to the el­i­gi­ble funds it will be the fund that re­ceived the most re­cent con­tri­bu­tion over the se­lected pe­riod.
   
   
3. If 1. and 2. do not ap­ply it will be the fund that held the largest bal­ance at the end of the pre­vi­ous finan­cial year.
   
   
4. If none of the above ap­ply the ATO will con­sider fac­tors like when an em­ployee joined a fund and other rel­e­vant in­for­ma­tion to iden­tify the 'sta­pled' fund.

Em­ploy­ees will also be able to see de­tails of their 'sta­pled' su­per fund in their my­Gov ac­count.

You can find out if your employee is covered by an award or agreement by checking with:

• Fair Work Ombudsman (for federal and state awards and agreements)
• The government agency responsible for workplace relations in your state or territory
• Your employer association.

An employee can choose a super fund by returning a completed Standard choice form to you or by providing you with a written notice that includes their employee identifier (if you have given them one) and the following information about their chosen super fund:

• The fund name, ABN and USI*
• The employee’s super account name and number
• A compliance statement
• Payment details for making contributions.

* A Unique Superannuation Identifier (USI) is used by superannuation fund administrators to identify superannuation funds for electronic rollovers.

In most circumstances you are required to comply with your employee’s choice of fund request, however, you may refuse a request if:

• the employee hasn’t provided all the required information:

-         the fund name, ABN and USI
-         the employee’s super account name and number
-         a compliance statement
-         payment details for making contributions

• the employee has nominated another fund in the previous 12 months (you can however, choose to accept their request).

If your employee provides a valid choice of fund request, you must start paying SG to the employee’s chosen fund within two months after receiving the request. Any contributions you make in the two months after receiving the form can be made to either your employer nominated super fund (your default fund) or the employee’s chosen fund.

You should retain the employee’s choice form for your records.

If you've provided a Standard choice form to an employee and they haven't chosen a fund  you must contact the Australian Taxation Office (ATO) to see if the employee has an existing super fund – their ‘stapled’ fund. If they do, you must make payments to this account.

If the new employee doesn’t have a 'stapled' fund and doesn’t choose a fund, then you may you must pay super contributions for your employee to your employer nominated superannuation fund (your default fund).

You could be liable for a 'choice liability' which is part of the superannuation guarantee charge (SGC). You could incur the choice liability if you:

• don't give your eligible employees a Standard choice form within 28 days of them starting work
• don’t pay your employee’s super contributions to their chosen super fund
• charge your employees a fee for complying with their choice of fund.