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  • Module 3: Setting up super for your employees

    This module outlines the steps to take to set up super for your employees:

    You can also review what you've learned in the Summary of Module 3.

    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 super fund is your employer-nominated fund (also known as a default fund).

    The default super fund you use must be:

    • a complying fund (one 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 with the trustee or an authorised representative of the super fund, or check the ATO register of complying super funds at Super Fund LookupExternal Link.

    You should contact the super fund you've chosen before offering it as a default super fund on the 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 employees a choice of fund

    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

    2.2: Provide a standard choice form

    2.3: Use your employer default fund if necessary

    2.4: Act on your employee's 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
    • not employed under any state award or industrial agreement (including 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 website at fairwork.gov.au External Link
    • phone the workplace relations department in your state or territory
    • check with your employer association.

    From 1 July 2015, you don't need to offer a choice of fund to employees:

    • whose super fund undergoes a merger or acquisition
    • who are on a temporary working visa.

    However, your employee retains the right to request a Standard choice form from you.

    2.2: Provide a standard choice form

    You must provide employees who are eligible to choose a super fund with a Standard choice form (PDF 326KB)This link will download a file (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, but you have to accept a new choice from them only 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 five 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 (PDF 326KB)This link will download a file.

    2.3: Use your employer default fund if necessary

    If an employee has not chosen a super fund or provided the necessary information, and a super contribution is due, you must make the payment for them into your employer-nominated super fund by the due date.

    2.4: Act on your employee's choice of fund

    Once an employee advises you of their choice of super fund, you have two months to start paying contributions into that super fund.

    You may be penalised if you don't offer your eligible employees a choice of super fund or you don't pay their super to their chosen fund. 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.

    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.

    Super funds can't accept personal contributions from employees 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.

    Step 4: Keep super guarantee employer records

    You must keep records that show:

    • how much super guarantee you paid for each employee and how it was calculated
    • that you have offered each eligible employee a choice for super fund, including
      • evidence that you've given the Standard choice form to all eligible employees. For example: emails if you issued the form that way and the written information your employee provided when they nominated their chosen 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 (eg 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 five 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 super guarantee payments.

    Summary of Module 3

    Remember, when setting up super for your employees:

    • inform employees of your default fund
    • offer employees a choice of super fund
    • provide their TFN to their super funds
    • keep super guarantee employer records for five years.
      Last modified: 09 Apr 2019QC 58510