What is super choice?

Superannuation Standard Choice Form

Super choice - short for 'superannuation standard choice form' is a form that advises employers of the employee's choice of super fund.

Super funds or superannuation funds are what employers put money into throughout an employee's working life so that they have sufficient funds to live off in their retirement. These payments are called superannuation contributions.

What employers need to know about super choice

If you are an employer it is important that you make the correct super contributions to the preferred superannuation fund of your employees. In order for you to know which is the correct superannuation fund to send the superannuation contributions to, the Australian Taxation Office (ATO) designed a form for employers to give to their employees so they can nominate their preferred superannuation fund. This is the super choice form.

When you hire a new employee you must use the super standard choice form to offer the eligible employee their choice of super fund. While most employees will likely have a preferred super fund they wish contributions to made to, it is important nonetheless that you fill in the details of your nominated super fund, also called a 'default fund', before you give the form to the employee.

Superannuation standard choice forms are available from the ATO's website, which you can find here.

What is a stapled superannuation fund?

If new employees do not choose a super fund you may be required by the ATO to an extra step to comply with the choice fund rules. You will likely need to request their stapled fund details from the ATO.

A stapled super fund is an existing super account which is linked, or 'stapled', to an individual so that it follows them as they change jobs. The purpose of this measure is to reduce account fees by stopping new super accounts from being opened every time an employee starts a new job.

In the event that an employer makes a stapled super fund request, the ATO will notify the relevant employee and include the fund details have been provided. For more information about stapled super funds, see the ATO's website here.

What employees need to know about super choice

If you are an employee you will need to use the super choice form to let your employer know of your choice of super fund. You do this by providing the information requested so your employer can make contributions to your nominated super fund.

Where an employee's super guarantee should be paid is ultimately down to what the employee wishes. Employees let their employer know their choice of fund by completing the super choice form.

If an employee decides to exercise their rights under super choice and join a different fund, the employer will have to make super contributions to the new fund.

How to complete the super choice form

There are three ways a super choice form can be completed:

1. via the ATO online services via myGov      
2. to do this, you must access the forms through the Employment menu
3. the employer's Australian business number (ABN) and their nominated super fund's unique superannuation identifier (USI) will be needed to complete this form
4. Via the employer's employee commencement-enabled payroll software
5. Download the Standard Choice Form from the ATO website, which you can access here. If an employee use this option it is important that give the form to their employer to action, not send to the ATO.

Types of super funds

There are 5 basic types of super funds: industry funds, retail funds, public sector funds, corporate funds, and self-managed superannuation funds.

INDUSTRY FUNDS

• industry funds can be open to everyone
• industry funds are available to employees who work in a particular industry or under a certain industrial award and when their employer signs up with the fund

RETAIL FUNDS    

• retail funds are run by financial institutions
• they are open to everyone

PUBLIC SECTOR FUNDS    

• public sector funds are generally open to Commonwealth, state and territory government employees
• public sector employers may offer defined benefit funds and Constitutionally protected funds (CPFs) to their members

CORPORATE FUNDS    

• corporate funds are generally only open to people who work for a particular employer or corporation, such as an investment company or a bank that specialises in wealth management
• corporate funds may offer defined benefit funds to their members

SELF-MANAGED SUPER FUNDS (SMSFS)

Self-managed super funds, also known as SMSFs work like any other super fund, with the crucial difference that the responsibility of managing them, (including their investment decisions and legal responsibilities) rests solely with the trustee (member).

Establishing and operating an SMSF is a major financial decision and given the costs involved in maintaining them it is not suitable to every financial situation, as a result you should first discuss your personal circumstances with a qualified professional, such as financial advisers or accountants who specialise in super.

ADVANTAGES OF SMSFS

• SMSFs offer more freedom when it comes to what investments they contain
• There is a possibility of higher returns with SMSFs compared with other types of super funds

DISADVANTAGES OF SMSFS

• SMSFs are more expensive to operate than other types of super funds
• There is a lot of regulatory responsibilities you take on as the trustee
• SMSF concessional contributions are capped
• There is a possibility of higher risk with SMSFs compared with other types of super funds

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Disclaimer

Any advice contained in this document is general advice only and does not take into consideration the reader’s personal circumstances. Any reference to the reader’s actual circumstances is coincidental. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances.