We recently had this question from a client. Your first thought might be ‘yes, of course they can!’ However, there are some interesting exceptions.
The ATO outlines that most people can choose the super fund they want their employer contributions paid into, as long as it’s a complying fund.
The most common situation where an employee can’t choose their own super fund is where the employer has an award or agreement in place which directly identifies which superfund is used for that business.
Other exceptions where an employee cannot choose their own superfund include:
- They’re a state or federal public sector employee, excluded from super choice by law or regulations,
- They’re in a type of defined benefit fund or already have reached a certain level of benefit within that super fund.
Remember, if your employee is entitled to choose their superfund, you must give them a ‘Standard Choice Form’ within 28 days of commencing employment so they can note their choice in writing. Make sure you keep a record of this documentation.
Why Restrict Choice?
Restricting choice of funds makes sense for very large organisations with thousands of employees, which would otherwise spend a lot of time distributing super to many different funds.
However, this might be changing with new technologies such as the ATO Clearing House coming into effect, which can manage super contributions even for small businesses with fewer than 20 employees.
Permitting choice of funds might have some interesting future ramifications for enterprise agreements which limit employees from choosing their own superfund, where providing a choice might be perceived as a greater benefit.