Choice of Fund frequently asked questions

1. Are my Employees eligible for Choice?

Not all Employees are entitled to exercise a Choice. Those employed under the following conditions may be eligible to choose:

Federal Awards
State Awards, Certified Agreements or Australian Workplace Agreements (AWA) that do not have superannuation clauses
Certain members of defined benefits superannuation funds
Those employed under a private, non-award agreement negotiated between employee and employer.
Choice is not available to Employees under the following conditions:

Where superannuation contributions are made under or in accordance with a State Award; Certified Agreement or an Australian Workplace Agreement;
Most Public Sector employees
Some members of defined benefits superannuation funds.

2. What do I need to do?

If your Employees are eligible for Choice of Fund, you must give your Employees a Standard Choice form which they must complete if they wish to exercise a choice.

To download the Standard Choice form, please click here.

Every eligible person you have employed on 1 July 2005 must receive this form by 29 July 2005. Any eligible Employee joining your business after 1 July 2005 must receive the Choice form within 28 days of starting work. Furthermore, eligible Employees also may request a form any time after 1 July 2005. You must provide the form within 28 days of receiving such a request.

Remember to record the date when the form was provided and when responses are received.

Also, once the Employee has provided written notification of their chosen fund, you must commence contributions to this fund within two months.

You must also choose a default fund, which is the fund you will pay contributions to for eligible Employees who do not exercise a choice.

3. What if I do nothing?

If you do not meet your Choice of Fund obligations, you may be liable for the choice shortfall.

The choice shortfall applies where you have paid Superannuation Guarantee (SG) contributions to a complying fund for your Employee but not to the fund chosen by them. The choice shortfall is roughly 25% of the contributions that are paid to the wrong fund.

A choice shortfall may also apply if you have not given your Employees a Standard Choice form in the required timeframe. For further information, please visit the Australian Taxation Office website at www.ato.gov.au/super.

4. What is a complying superannuation fund and is it my responsibility to check that my Employee's nominated fund is complying?

As an Employer, you must ensure your Employee's nominated fund is a complying superannuation fund. This is a fund deemed as 'complying' under the terms of the Commonwealth Superannuation Guarantee (Administration) Act 1992; and can accept Superannuation Guarantee contributions.

Auswide is a complying fund. To download our Statement of Compliance please click here.

You can check the Register of Complying Funds (ROCS) listed on the Australian Taxation Office website at www.ato.gov.au/super.

5. How do I select a default fund?

If the majority of your Employees are already in a particular fund and are happy with it - and you are already familiar with the administration and service provided by the fund - it may be more practical for you to make it your default fund.

Other factors to consider when choosing a default fund include the fees charged and the fund's long-term performance, as these will impact on your Employee's retirement income.

Also consider the life insurance options offered by the fund and whether coverage meets the minimum required under the Choice of Fund framework. Will the fund require Employees to undergo medical checks before offering any level of insurance?

It is also important to evaluate the type of investment options available to allow your staff the flexibility to directly influence how their superannuation is invested within the fund.

6. What if one of my Employees does not make a choice?

The law only offers a choice - it does not compel eligible Employees to make one. 

If eligible Employees don't make a choice within 28 days of receiving the Standard Choice form, you must place them in your default fund. It is important to keep accurate records tracking all choice-related correspondence between yourself and your Employees, including when any Employee requests are actioned.

7. What can I expect from my Employees?

To make a choice effective, eligible Employees must complete and return the Standard Choice form and provide the following details in writing:

The full name and ABN of their chosen fund;
The Employee's account name and membership number in the fund (if applicable);
The product number for the fund, if the fund uses numbers to identify its products;
Written evidence from the fund trustee that it is a complying fund (Statement of Compliance);
All necessary details about how contributions are accepted, such as by cheque or electronic transfer.
If eligible Employees wish to remain with Auswide they don't need to make a choice, if as an Employer, you have chosen Auswide as your default fund. However, they may request a choice at a later date and are entitled to make one choice per 12 month period.

8. How do I process a choice request?

You are legally required to start paying contributions within two months of receiving an eligible Employee's request.

This means if you receive a request on 30 November 2005, you must start paying contributions to the chosen fund by 30 January 2006.

If the Standard Choice form isn't completed properly, you may refuse to accept it until the Employee provides you with the required information. Contributions must continue to be paid into the default fund until all necessary details are provided.

Note: Eligible Employees must select a complying fund as not all funds can accept Employer contributions (see question 4)

9. Can I decide how often my Employees can change their chosen fund?

The legislation requires Employers to facilitate one choice per eligible Employee in any 12-month period. However, it is up to you to allow eligible Employees to change funds more often.

10. What type of contributions are subject to Choice?

Choice applies to Superannuation Guarantee contributions only.  Additional contributions, be they discretionary contributions paid by the Employer as a bonus, or voluntary contributions made by the Employee with their pre- or after-tax income, may be paid to another superannuation fund or the same fund selected under Choice.

Note: Penalties may be incurred for not properly managing the introduction of Choice of Fund in your workplace.