Step 1: Inform employees of your default fund
Before you offer your employee the option to choose a super fund, you must inform them which fund you'll pay their super into if they can't or don't choose their own super fund. This can be done at the same time as Step 2.
You can pay super contributions into your employer-nominated fund (also known as a default fund) if your employee:
- doesn't choose a super fund
- started on or after 1 November 2021
- doesn't have a stapled super fund (as advised by us).
The default super fund you use must be:
- a complying fund that meets specific regulatory requirements and obligations under super law
- registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.
To make sure your super fund meets these requirements, check the ATO register of complying super funds at Super Fund LookupExternal Link. You can also contact the trustee or an authorised representative of the super fund.
You should contact the super fund you've chosen before offering it as a default super fund on the Superannuation standard choice form.
You give your employee the details of this default super fund in Section B of the Standard choice form.
Step 2: Offer eligible employees a choice of fund
From 1 November 2021, if you have new employees start you may have to take an extra step to comply with choice of fund rules if they don’t choose a super fund. You may now need to request their stapled super fund details from us.
A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.
The change aims to reduce account fees by stopping new super accounts from being opened every time an employee starts a new job.
If you don't meet your choice of super fund obligations, additional penalties may apply.
As an employer, there are a few steps you need to take when offering employees a choice of fund:
2.1 Identify employees who are eligible to choose
When you employ new staff, you need to check if they're eligible to choose a super fund. Your new employee is eligible to choose their super 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 an award or industrial agreement that does not require super contributions
- employed under an enterprise agreement or workplace determination made on or after 1 January 2021
- not employed under any state award or industrial agreement (including independent contractors who are regarded as eligible employees for super purposes).
If you're not sure what award or industrial agreement covers your employee:
- visit the Fair Work Ombudsman website at fairwork.gov.auExternal Link
- phone the workplace relations department in your state or territory
- check with your employer association.
You don't need to offer a choice of fund to employees:
- whose super fund undergoes a merger or acquisition if you pay to the new fund
- who are on a temporary working visa.
However, your employee retains the right to request a Standard choice form from you and you may still need to request a stapled super fund for these employees if they started working for you on or after 1 November 2021.
2.2 Provide a standard choice form
You must provide employees who are eligible to choose a super fund with a Standard choice form (NAT 13080) (or equivalent) within 28 days of their start date, unless they give you details of their chosen super fund first.
You don't have to use the Standard choice form, but any alternative document must cover all the information that the Standard choice form covers.
Existing eligible employees are entitled to change their choice of super fund as often as they want to. However, you only have to accept a new choice from them once in any 12-month period. If your employee asks for a choice form, you have 28 days to provide it.
You need to keep a copy of the completed Standard choice form for your own records for 5 years. You don't need to send a copy to us or your employee's chosen super fund.
You also have to give employees a Standard choice form within 28 days if you:
- can't contribute to their chosen super fund or it's no longer a complying super fund
- change your employer-nominated super fund and you're paying the employee's contributions into that super fund.
Take a few minutes to explore the Standard choice form (NAT 13080).
2.3 Request a stapled super fund from the ATO
From 1 November 2021, if you have new employees start you may have an extra step to take to comply with choice of fund rules if they don’t choose a super fund. You may now need to request their stapled super fund details from us when:
- you need to make super guarantee (SG) payments for that employee
- they are eligible to choose a super fund, but don't. This includes independent contractors who are eligible employees for super guarantee purposes.
You or your authorised representatives can request stapled super fund details using ATO online services.
2.4 Use your employer default fund if necessary
If they don't have a stapled super fund, you should make payments into your employer-nominated super fund to avoid the super guarantee charge.
2.5 Act on your employee's choice of fund
Once an employee advises you of their choice of super fund, you have 2 months to start paying contributions into that super fund. For existing employees, you can continue paying to their current super fund during this time.
For new employees starting on or after 1 November 2021, if you need to make a SG contribution during this time, contributions should be made to the employee’s chosen fund or their stapled super fund (if any) if they have not made a choice.
You may be penalised if:
- you don't offer your eligible employees a choice of super fund
- you don't pay their super to their chosen fund
- the employee started on or after 1 November 2021 and has not made a choice, and you don't request details of and pay into the employee's identified stapled super fund (if any) – this penalty is known as the 'choice liability'. We will discuss this penalty further in Module 7: Reducing the risk of penalties.
Step 3: Provide an employee's TFN to their fund
If your employee gives you their tax file number (TFN), you must provide it to their chosen super fund the next time you make a payment for them to that super fund.
If you receive the TFN less than 14 days before you're due to make a payment, you have 14 days to provide the TFN to the super fund.
There are penalties if you don't pass an employee's TFN to their super fund. It's also your responsibility to ensure that third parties you engage pass TFNs on to super funds.
Super funds can't accept personal contributions from an employee if they don't have the employee's TFN. If you have an employee who wants to make personal super payments as a payroll deduction, check you have given their TFN to their super fund.
Third-party contracts
If you use a third party to manage your payroll or a clearing house to distribute super contributions to your employees' funds, make sure your contracts with them allow them to pass TFNs to super funds or RSAs on your behalf, and that they do so.
If they don't pass on the TFNs, you are liable for the penalties, not the payroll service provider or clearing house.
Step 4: Keep super guarantee employer records
You must keep records that show:
- how much SG you paid for each employee and how it was calculated
- that you have offered each eligible employee a choice of super fund, including
- evidence that you've given the Standard choice form or similar documentation that captures the same information to all eligible employees. For example, letters or emails sent to each employee and the written information your employee provided when they nominated their chosen fund
- details of the outcome of your stapled super fund request or why you have not made a request for a stapled super fund
- details of employees you don't have to offer a choice of super fund to
- confirmation that your nominated (default) super fund offers a MySuper product
- that you've made super contributions for each eligible employee (for example, receipts or other documents issued by a super fund or bank records of the payments made).
You can use whatever method you choose to keep these records, but:
- the records must be written in English (or in a format that can be easily accessed and converted into written English)
- you must keep the records for 5 years
- if you keep electronic records, software must be available to access older floppy disks, CDs and computer records.
Even if you use a clearing house to distribute super to your employees' super funds, you're still responsible for keeping adequate records of SG payments.
Summary of Module 3
Remember, when setting up super for your employees:
- inform employees of your default fund
- offer eligible employees a choice of super fund
- request details of an employee’s stapled super fund, if they started working for you on or after 1 November 2021 and do not make a choice of super fund
- provide their TFN to their super funds
- keep super guarantee employer records for 5 years.
Return to Module 2: Working out if you have to pay super.
Continue to Module 4: Calculating super guarantee.