Introduction

The Federal government has announced that it will introduce legislation to progressively provide employees with a choice about which superannuation fund receives compulsory employer superannuation contributions made on their behalf. The legislation is intended to take effect from 1 July 1998 and will apply to both superannuation guarantee and award superannuation contributions for employees covered by Federal awards. The details of the announcements are contained in Attachment A.

Choice will not apply to employees covered by Australian workplace agreements or certified agreements as this would be inconsistent with the spirit of the federal industrial relations legislative framework.

Application to State industrial instruments

The choice of fund legislation may not apply to employees working under State industrial awards or agreements. The New South Wales government has not yet been approached to consider introducing complementary legislation to have choice of fund for employees employed under State industrial instruments. Also, the announcements make it clear that the proposal will not apply to unfunded public sector superannuation schemes.

Implementation

It is understood that the Commonwealth intends to introduce this legislation in November or December this year. The application of the proposal to NSW public sector employers will be assessed when the provisions of the federal legislation have been analysed. However, employers which are respondents to federal awards should be mindful that responsibilities for meeting the detailed requirements of the legislation will ultimately rest with their organisations.

In the meantime employers who are party to NSW Awards and industrial instruments should continue with current practices in respect of superannuation'.'

The 1997-98 Federal Budget provides extra funding to the Australian Taxation Office (Superannuation Department) to prepare and deliver education packages, design administrative systems and support both initial and ongoing inquiries and complaints handling. Should your organisation require more detailed information about Choice of Fund obligations, advice is available from the ATO Superannuation Help Line on 131020.

C. Gellatly
Director-General

ATTACHMENT A

Employer Obligations and Penalties in Respect of Eligible Employees by the Federal Government

The Federal government has announced that it will introduce legislation -to progressively provide employees with a choice about which superannuation fund receives compulsory employer superannuation contributions made on their behalf. This applies to both superannuation guarantee and award superannuation contributions for employees covered by Federal awards.

From 1 July 1998, employers will be required to provide new eligible employees the choice of at least five funds. For existing employees, the employer must offer similar choices within two years of the date of effect of the legislation. The employees have within 28 days to nominate their choice or the option reverts to the employer. The five or more choices offered must include:

• at least one Retirement Savings Account (RSA); and
• at least one public offer superannuation fund.

The employer must also include, subject to their existence:

• a relevant industry fund(s);
• an RSA provided by the institution receiving the employee's pay; and
• an in-house superannuation fund.

Employers will be required to supply the employee with a Key Features Statement prepared by each selected fund and RSA, as well as any relevant application forms. Employers will also be expected to advise employees of all the consequences of their decisions, for instance, the implications of an election to leave a defined benefit scheme.

Employers will be bound by their employees' decisions, and will be liable to pay the superannuation guarantee charge as a penalty for non-compliance. However, employers will not incur any penalty when:

• an employee does not nominate a fund within 28 days; or
• an employee's choice is not able to be implemented (ie the fund nominated ceases to be a complying superannuation fund, or otherwise refuses or is unable to accept contributions).

Employees will be able to amend their nomination of superannuation fund but employers will not be obliged to act on an employee's amended nomination of fund within 12 months of acting on a previous nomination. Also, employers would only be obliged to contribute to one fund or RSA for any individual employee.

It should be noted that section 78 of the (Cth) Retirement Savings Accounts Act 1997 prohibits an RSA provider or its associate from providing an employer with incentives to direct superannuation contributions to the RSA offered by the institution.