Choice of superannuation fund: choice made before 1 July 2005

If an employee chooses a fund before 1 July 2005, will employer contributions to the employee's chosen fund reduce the employer's liability to the superannuation guarantee charge (SGC) and satisfy the choice of fund requirements?

Yes. If an employee actively chooses a fund before 1 July 2005, employer contributions to the employee's chosen fund will reduce the employer's liability to the SGC and satisfy the choice of fund requirements. The employer will consequently have no need to provide a Standard choice form to the employee by 28 July 2005.

The employer has always allowed employees to choose the complying superannuation fund into which superannuation guarantee (SG) contributions will be paid. The employer allowed employees to choose any complying superannuation fund and did not restrict their choice to a selection of preferred funds.

An employee chose a fund on 20 January 2005.

The employee is not employed under an Australian workplace agreement, certified agreement, State award or State industrial agreement.

The employee's choice was made in writing and contained all the information required under the law and associated regulations for the choice to be valid.

The employee's chosen fund is an eligible choice fund and is a fund to which the employer can make contributions for the benefit of the employee.

The employer accepts the choice and makes contributions for the benefit of the employee to the employee's chosen fund starting from 20 January 2005.

The choice of fund requirements, which form part of the Superannuation Guarantee (Administration) Act 1992 (SGAA), take effect from 1 July 2005. Section 32C of the SGAA details the types of contributions that will satisfy the requirements. Subsection 32C(1) ensures contributions satisfy the requirements if they are made by an employer to a 'chosen fund' of the employee.

Subsection 32F(1) of the SGAA states that if an employee wants a fund to be their chosen fund, the employee must give the employer written notice to that effect. The chosen fund must be an 'eligible choice fund' and must be a fund to which the employer can make contributions for the benefit of the employee (subsection 32G). An 'eligible choice fund' is defined by section 32D of the SGAA to include complying superannuation funds and retirement savings accounts.

Ordinarily, an employee's choice is facilitated by the employer providing a Standard choice form to the employee.

Section 32N of the SGAA sets out the circumstances in which an employer is required to give their employees a Standard choice form and the timeframes in which to do so. For example, under subsection 32N(1), an employer must provide a Standard choice form to all existing employees by 28 July 2005.

However, subsection 32NA(1) of the SGAA states that an employer is not required to give an employee a Standard choice form if the employee has chosen a fund under section 32F by the times specified in section 32N. For example, for an existing employee, the employer is not required to give that employee a Standard choice form if the employee has chosen a fund by 28 July 2005.

In the circumstances of this case, the employee chose a fund on 20 January 2005. The employee provided all the information required by the law and the associated regulations and the choice was in writing. The fund chosen by the employee is a complying fund to which the employer can make contributions. The employer accepts the choice and starts making contributions to the employee's chosen fund from 20 January 2005.

These contributions satisfy the requirements under subsection 32C(1) of the SGAA as they are made by an employer to a 'chosen fund' of the employee. The contributions to the employee's chosen fund will reduce the employer's liability to the SGC and meet the choice of fund requirements.

The employer will therefore have no need to provide the employee with a Standard choice form in July 2005. Note 1: An employee can still request a Standard choice form from the employer. Under subsection 32N(3), the employer must provide a Standard choice form to the employee within 28 days of receiving a request to do so from the employee (unless the employee has been given a Standard choice form within the previous 12 months). Note 2: Employers do not have to wait until 1 July 2005 to provide the Standard choice form to their employees. Employers can start getting ready to meet the choice of fund requirements. The ATO released the Standard choice form on 14 March 2005. This means an employer can provide a Standard choice form to an employee any time from 14 March 2005.