Are you ready for choice of fund?

The choice of fund regime will apply to most superannuation arrangements from July 1 2005, giving employees the right to choose where their super guarantee contributions go. This is a major change to the law. To avoid incurring tax penalties, employers must, in advance of July 1 2005, put in place measures to ensure that they are able to comply. While the choice of fund regime will apply to all types of employers, it will not apply to all employees. The main categories of employers not required to offer a choice are those using Australian workplace agreements, certified agreements, state awards, certain public sector employers and certain members of defined benefit schemes. The new choice regime applies to contributions used to satisfy super guarantee obligations, but not to additional or voluntary employer contributions. Employers must give their eligible employees a ‘standard choice form’ which offers them an unlimited choice of funds. The employer must then make contributions to the chosen fund unless an exemption applies. Where an employee does not choose a fund, employers will be able to contribute to their ‘default fund’. Employers will need to carefully review their existing super arrangements to determine whether they are required to offer choice or not. For example, if a state industrial award contains an obligation to contribute to a certain fund then, for employees covered by the award, the employer cannot offer choice, as this would breach the award requirement. Failure to meet the Choice of Fund requirements will incur a penalty of 25 per cent of the quarterly super guarantee contribution not made to the chosen fund. This is subject to a cap of $500 per employee, for each relevant period. Ruth Stringer, partner For more information contact Andrew Burnett, partner, 9429 7444 Minter Ellison

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