Rules for setting up super and choice of fund for new employees (2024)

When a new employee starts working for you, in most cases you must allow them to choose thesuper fund into which you pay their Super Guarantee (SG) contributions. Existing employees who are eligible to choose a fund can also direct you to change the superannuation fund you make contributions to for them.

While the new rules extending the number of employees with the right to fund choice havesimplified some aspects of employee super, it’s not all clear sailing.

Not only do you still have to identify eligible and ineligible employees, but youmust now also get details of a new employee’s‘stapled fund’ from the ATO if they don’t make a choice when they commence employment.

These days, most employees get to choose their own super fund for the SG contributionsyou make on their behalf,unless they are considered ineligible to make a choice.

When you’re dealing with a new employee, they will generally be eligible for choice of fund unless you are using an enterprise agreement that specifies a super fund and was made prior to 1 January 2021 or you are a government employer using a public sector scheme that excludes choice. The remaining categories not eligible for choice refer to older employment arrangements that may apply to long standing employees in limited circ*mstances.

If you are uncertain what award or industrial agreement covers your new employee, check the Fair Work websiteor the workplace relations department in your state or territory.

To notify you of their choice, your employees need to complete the ATO’sSuperannuationStandard Choice Formor an alternative document that covers the same information and return it to you. Alternatively, the form can be completed online via ATO online services linked to MyGov.

You can download theSuperannuation Standard Choice Formhere.

By law you are required to give staff members who are eligible to choose a fund aSuperannuation Standard Choice Form or a compliant alternative within 28 days of:

  • the employee commencing work
  • changing the default fund into which you pay their contributions
  • the employee requesting a form, unless they have made a choice within the previous 12 months
  • becoming aware the fund you are contributing to will not accept your contributions for the employee or has ceased to be a complying fund

You do not have to provide a choice form when:

  • the employee is a temporary resident
  • the fund you contribute to for the employee has its members transferred to another fund via a successor fund transfer (SFT)

Temporary residents and employees whose fund is undergoing a SFT are still eligible to choose a fund (unless excluded by another eligibility rule), but the obligation to provide a choice form at the time a temporary resident commences employment or at the time of the SFT has been removed to reduce administration complexity for employers. These categories of people rarely make an active super choice and so the requirement to automatically provide them with a choice form was removed in 2015. If such an employee requests a choice form, you should provide it.

Learn more about the Superannuation Standard Choice Form.

Determining a super fund for new employees

Since 1 November 2021, if a new employee does not choose their own super fund, you need to request theirstapled super funddetails from the ATO.

The first step is to offer eligible employees choice of fund. If the employee makes a choice, you do not need to request stapled fund details. The choice of fund form allows your employee to choose the default fund you have selected even if they are not already a member of that fund.

Next, request stapled fund details for any employee who has not made a choice. You must make the request even if the employee is a temporary resident or is not eligible for choice of fund due to an enterprise agreement or workplace determination made prior to 1 January 2021. Only some public sector employees and employees under preserved or notional state agreements are exempt from the stapling rules.

Before you can request stapled fund details, the ATO needs to confirm an employment relationship exists between you and your new employee. The easiest way to confirm the employment relationship is to have your employee complete a TFN declaration and submit it to the ATO or to complete a Single Touch Payroll (STP) pay event. If you have difficulty, refer to the ATO’s guidance.

Once the employment relationship is established, you can request stapled fund details via ATO Online services for business, or your tax or BAS agent can complete the request for you. If you need to request stapled fund details for more than 100 employees at once, you may use the bulk request form.

When you are provided with a stapled fund, you must contribute to that fund unless the employee has made another choice in the meantime. If the stapled super fund account details are for anSMSF, you will need to obtain the electronic services address and bank account details from your employee.

If the ATO advises that there is no stapled fund for the employee, you may proceed to make contributions to your default fund.

If the stapled super fund rejects your contributions, you should make another request via the ATO’sOnline Services for Businessfor your employee’s stapled super fund. This may occur if their super account has been closed since you received the original details,or if it is a fund that only accepts contributions from certain employers.

Recordkeeping and your completed choice forms

Under super law, you must keep a copy of eachSuperannuationStandard Choice Formor ATO online printed summary you receive forfive years.

Your records must show how much SG you paid for your employee and how it was calculated, that you offered each eligible employee a choice of fund, and details of any employees ineligible for choice of fund.

When your employeegivesyou a completedchoice form, you do not need to forward it to the ATO or your employee’s chosen super fund. ASuperannuationStandard Choice Formsimply acts as an official notification to you of where your employee wants their super contributions paid.

Super tip:The Fair Work Act requires you to keep your employees informed about the super contributions you make on their behalf and you are obliged to include super contribution amountson their pay slips.

Actioning an employee’s choice

Once an eligible employee advises you of their chosen super fund, you must startpaying super contributions into that fundwithin two monthsof receiving a valid choice. The only exception is if the employee has made another choice within the previous 12 months – in this case you may commence paying the new fund if you wish, but it is not compulsory. If you don’t pay your employee’s super contributions into their chosen super fund, the ATO will penalise you for not complying with super law. Failing to meet your choice of fund obligations means you are liable to pay achoice liabilityfor your employee.

You must not charge your employee a fee if they want to change super fund, or for making SG contributions to their super fund.

Learn about the super choice penalties.

Passing on your employee’s TFN

Another important obligation you need to fulfill when setting up an employee’s super contributions is to provide their chosen super fund with their tax file number (TFN).

Once your employee gives you their TFN, you are obligated to provide it to their chosen super fund. You must do this when you make the first super contribution for the employee, or within 14 days of receiving their TFN if it was not available at the time of your first contribution for them.

Super funds are unable to accept personal voluntary contributions from employees if they don’t have their TFN. This makes it essential to pass on a TFN if your employee wants to make personal super payments as a payroll deduction.

Need to know

If you do not pass on a TFN to your employee’s chosen super fund in a timely fashion, the ATO may penalise you 10 penalty units ($2,220 until 30 June 2022, and $2,750 from 1 July 2023).

It’s alsoyour responsibilityto ensure any third-party service providers (such as payroll or clearing house services) you engage pass TFNs on to your employees’ chosen super funds.

You must ensure your contract with a service provider allows them to pass on TFNs and that they do so. If they do not pass on a TFN,you will be liablefor any ATO-imposed penalties, not them.

Employer beware: Giving financial advice to employees

There are strict rules about giving advice or product recommendations forfinancial products like super funds, so be careful when you talk to your employees about superannuation.

You are permitted to provide your employees with factual information about:

  • Why they need to choose a super fund
  • The process of choosing a super fund
  • Your obligations as an employer
  • How they nominate a super fund as their chosen fund.

Need to know

Unless you hold a financial services licence (AFSL) from the Australian Securities & Investments Commission (ASIC) to provide financial advice, it isillegalto make recommendations or give advice to your employees about which super fund they should choose.

Likewise, you must not attempt to influence how much they decide to contribute, or if they should consider consolidating their super accounts.

Learn about the different types of financial adviceand what happens when you meet a financial adviser.

Learn about financial advice through super funds.

It’s up to your employee to find out how to join a super fund and get theinformation andproductdisclosure statement(PDS) they need to select the right super fund for their personal situation. Your employees are also responsible for filling out their super fund’s membership application correctly.

If they need more information, you can direct your employees to government websites such as ASIC’s Moneysmart or some of the detailed information on theSuperGuidewebsite.

Learn about super for beginners, different types of super funds andhow to compare super funds in 7 easy steps.

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Rules for setting up super and choice of fund for new employees (2024)


How do I set up a super fund for an employee? ›

Follow the below steps to determine a new employee's super fund when they start employment.
  1. Step 1: Employee chooses a fund. Most employees are eligible to choose their own super fund. ...
  2. Step 2: Check for a stapled super fund if no fund is chosen. ...
  3. Step 3: Pay into your nominated default fund.

What are the new rules for superannuation? ›

As of July 1, 2023, the super guarantee, that being the percentage of your wage that your employer is required to pay, increased from 10.5% to 11%. The super guarantee will continue to rise in 0.5% increments until it reaches 12% in 2025.

What are the rules for SGC? ›

Overview. If you don't pay an employee's super guarantee (SG) amount in full, on time and to the right fund, you must pay the super guarantee charge (SGC). You must also lodge an SGC statement to us. The SGC is more than the super you would have otherwise paid to the employee's fund and is not tax deductible.

How do I choose a default super fund? ›

There are a number of rules around choosing a default fund:
  1. It must be a complying fund (a fund that meets specific requirements and obligations under super law)
  2. It must be registered by the Australian Prudential Regulation Authority (APRA) and offer a MySuper product.

How much does it cost to set up a super fund? ›

SMSF Trust Deeds

Every SMSF setup requires a trust deed. The trust deed is a legal document outlining the rules and regulations of your SMSF. Costs for the legal documents for setting up an SMSF typically range from $1,450 to $4,850 depending on your fund's structure.

Can I create my own super fund? ›

You need to be wealthy to have a SMSF. While you need to have a substantial opening balance (around $200k) there's no minimum balance needed to open or run a SMSF. SMSFs are too risky. You're in charge so the level of risk depends on how you choose to manage your SMSF.

What is the current super limit? ›

The current caps are: Before-tax super cap: $27,500 (including employer contributions) – but could be more where members use the 'carry forward' rule. After-tax super cap: $110,000 – but could be more where members use the 'bring forward' rule.

Can I deposit a lump sum into my super? ›

Personal contributions can be made regularly from your after-tax pay, or as a lump sum at any time through the year. You must have supplied your TFN to your super fund before it will accept personal contributions. Your super fund can accept personal or voluntary contributions from you until you reach age 75.

How much super should I have at 40? ›

​​How much super should I have? ​
9 more rows
Apr 11, 2024

What is the maximum employer contribution to SGC? ›

Maximum superannuation contribution base

The limit is indexed to AWOTE and changes every financial year. For 2023 - 2024 the maximum superannuation contribution base is $62,270 per quarter.

Are bonuses exempt from SGC? ›

Employers need to pay super on bonuses if certain requirements are met. Under the superannuation guarantee (SG) rules, if your bonus counts as 'ordinary time earnings', then your employer has to make a super contribution for that bonus.

What is the maximum employer SGC? ›

Maximum Superannuation Contribution Base

This means that the maximum super guarantee amount an employer is required to contribute is the equivalent of 11% of $62,270 per quarter (equivalent to $249,080 for the year), which works out to be a contribution of $6,849.70 per quarter.

How does Superchoice work? ›

Super choice is when your employer allows their employees to choose the MySuper product or super fund they want. You don't have to use the one chosen by someone else like your employer, industrial award or workplace agreement.

What is a choice of super fund? ›

WHAT IS CHOICE OF SUPERANNUATION FUND? Choice of superannuation fund is a new law that gives many employees the right to choose which superannuation fund will receive their employer superannuation contributions.

Do you have to choose a super fund? ›

Your employer will pay your super, even if you don't choose a super fund. Your employer will pay your super contributions into either: your existing super fund, which is called a stapled super fund. their default super fund.

Do I have to pay super for employees? ›

As an employer, it is compulsory to pay your eligible employees super guarantee (SG) at least 4 times a year. The minimum SG rate you must pay for each eligible employee is 11% of their ordinary time earnings (OTE). This is scheduled to progressively increase to 12% on 1 July 2025.

How do I make a super contribution? ›

Personal contributions can be made regularly from your after-tax pay, or as a lump sum at any time through the year. You must have supplied your TFN to your super fund before it will accept personal contributions. Your super fund can accept personal or voluntary contributions from you until you reach age 75.

How much money do you need to set up a self managed super fund? ›

There is no mandated minimum balance to start an SMSF. However, research conducted by the Australian Securities & Investments Commission (ASIC) suggests that an SMSF needs to have a balance of at least $200,000 before it becomes more cost-effective than a typical super fund.

Who can be a member of a super fund? ›

All members of the fund must be individual trustees or directors of the corporate trustee, so make sure they're eligible. Anyone 18 years old or over can be a trustee or director of a super fund so long as they're not under a legal disability (such as mental incapacity) or a disqualified person.

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