The Superannuation Guarantee (SG) system ensures that employers contribute a minimum percentage of an employee’s earnings into superannuation. However, many employees also have the right to choose which super fund receives these contributions. Understanding choice of fund rules and portability options is essential for both employees and employers.
What is the Superannuation Guarantee (SG)?
The SG is a compulsory contribution that employers must make to their employees’ super funds. For the 2023/24 financial year, the SG rate is 11% of an employee’s Ordinary Time Earnings (OTE). This rate is legislated to increase to 12% by 2025.
Who Can Choose Their Super Fund?
Employees covered by federal awards, enterprise agreements (after 1 January 2021), or those not covered by specific agreements can typically choose their preferred super fund.
Who Cannot Choose Their Super Fund?
Certain employees do not have choice of fund, including those:
- Covered by state industrial awards or agreements
- In defined benefit super schemes
- With super paid under specific government legislation
- On temporary work visas
- Whose employer contributions are transferred due to a fund merger
Extending Super Fund Choice
Since 1 January 2021, changes to SG rules allow employees covered by new enterprise agreements or workplace determinations to choose their own super fund. This prevents employees from being forced into multiple super accounts with additional fees.
How to Choose a Super Fund
To nominate a super fund, employees must provide their employer with a Standard Choice Form, which includes details of their preferred super fund. Employers must act on this request within two months.
Portability of Super: Consolidating Accounts
Under super portability rules, employees can transfer their super from one fund to another to consolidate accounts and avoid paying multiple fees. Employers are required to process these requests within three business days.
Penalties for Non-Compliance
Employers who fail to meet choice of fund obligations may face penalties of up to $500 per employee per quarter. If SG contributions are not paid correctly, employers may also be liable for the Superannuation Guarantee Charge (SGC), which includes interest and administrative fees.
Final Thoughts: Take Control of Your Super
Choosing the right super fund and ensuring compliance with SG rules can have a significant impact on retirement savings. Employees should review their super fund options regularly, while employers must stay compliant to avoid penalties. If you need assistance with superannuation planning or employer obligations, seek professional advice.