Employees’ obligations

Employees’ obligations
Employees are not obliged to choose a superannuation fund or return the Standard choice form to their employer. However, if an employee wishes to choose a superannuation fund, they must fulfil the obligations listed below.

Before doing these things, employees are encouraged to read the publication Super Choices to learn more about superannuation and how to compare funds. This free booklet is available by calling 13 28 64 or can be downloaded from the website www.superchoice.gov.au

Arrange to become a member of their chosen fund
If they are not already a member of the fund they wish to choose, an employee must arrange to become a member.

Give their employer a correctly completed standard choice form
If an employee wishes to choose a superannuation fund, they should provide their employer with the following information:

the fund’s full name and contact details
the fund’s Australian business number (if it has one)
the employee’s membership details, including their account name in the fund and the number or other unique identifier (if any) the fund uses to refer to their account
a statement, provided by or on behalf of the trustee of is able to accept contributions from the employer
the method of payment the employer can use to make the superannuation contributions to the fund
the superannuation product identification number (if any), and
the unique identifier or number (if any) the employer uses to refer to the employee (such as a payroll number).
If an employee’s chosen fund is a self managed superannuation fund, evidence must also be provided to show that it is a regulated superannuation fund. If the fund is less than two years old, this evidence should be the Tax Office notice of registration called Advice about regulation of your self managed fund. If the fund is more than two years old, this evidence should be the Tax Office letter of compliance called Notice of complying fund status – self managed superannuation fund.

If an employee does not provide all the information required, their employer can continue to make contributions to the employer fund.

An employee should keep a copy of the information they give to their employer and the date the information was provided. The Tax Office may contact the employee to verify that all the required information was provided for a choice to take effect.

Must not take money out of their superannuation fund early
Employees must not use a self managed superannuation fund or other scheme to obtain improper early access to their superannuation. This is illegal and significant penalties apply to both the fund and the recipient if a benefit is unlawfully released early.

Employees should be wary of advertisements, seminars and websites that claim they can have early access to their preserved superannuation benefits. Early access or release of superannuation benefits is permitted only in cases of severe financial hardship or on tightly restricted compassionate grounds.

Before considering an early release of benefits, employees should seek independent advice on the taxation consequences from an Australian tax professional who is familiar with the superannuation legislation or note the warnings on the Tax Office website.

Superannuation funds and trustees’ obligations
The obligations superannuation funds and their trustees must fulfil under choice of superannuation fund are listed in this section. However, these obligations are explained in more detail on ASIC’s website www.asic.gov.au

Advise employees if their employer can make contributions to the fund
If requested, a trustee of a superannuation fund that wishes to accept new choice of superannuation fund members should provide a written statement to an employee that their fund is a resident regulated fund and can accept contributions from the employer for the employee.

Give employees information to complete the standard choice form
If the superannuation fund is able to accept contributions from the employer on behalf of an employee, trustees should provide the employee with the information they need to complete the Standard choice form, including:

the fund’s full name and contact details
the fund’s Australian business number (if it has one)
the employee’s fund membership details
a statement from the trustee that the fund is a resident regulated superannuation fund and is able to accept contributions from the employer
the method of payment the employer can use to make superannuation contributions to the fund, and
the superannuation product identification number (if any).
Be appropriately licensed
The trustee of a public offer superannuation fund will need to be licensed by ASIC in relation to any dealing activities, unless an appropriate exception applies. A trustee of a superannuation fund that provides financial product advice will also need to be appropriately licensed and authorised or provide advice only within the limited exemptions specified in the law.

It is up to trustees to ensure that they have the right authorisations to cover the type of advice they are giving about choice of superannuation fund (for example, general or personal advice) or that their advice falls within the specific exceptions in the law. Recent policy proposals announced by the Australian Government may provide additional exceptions in relation to financial product advice.

Without the appropriate license or authorisation, a trustee cannot give financial advice about their fund, including to existing or prospective members or to employers unless they are acting within a legal exception.

For more information, see the ASIC guide Licensing: The scope of the licensing regime: Financial product advice and dealing (updated November 2002) and frequently asked questions (QFS) 17 and 134 at www.asic.gov.au

Comply with disclosure obligations
Trustees must prepare (and keep up to date) a product disclosure statement for their superannuation fund.

The product disclosure statement must be clear, concise, effective and contain the information an employee would reasonably need to make a decision about joining the fund. This includes information about the features of the fund, including insurance benefits, and fees and costs.

A trustee must also give additional information about the fund on request to prospective and existing members and advisers.

For more information, see ASIC Policy Statement (PS) 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) at www.asic.gov.au

Must not make false or misleading statements about the fund
A trustee must not engage in misleading or deceptive conduct. This might include:

making false or misleading statements, for example about whether the fund is a complying fund or eligible choice of superannuation fund, or about the features of a fund (including its fees, costs and financial performance), or
failing to provide certain information about the fund.
Must not offer employers inducements for choosing the fund
Superannuation fund trustees (and their associates) must not give or offer inducements to an employer on the condition that their employees join the trustee’s fund. This includes offering or giving discounted goods or services.

The limited exceptions to this rule are where the offer to the employer:

relates to providing a ‘clearing-house service’ that distributes superannuation contributions to the employee’s fund on behalf of the employer
relates to providing an administration or advice service relating to the payment of superannuation contributions
relates to an arms-length business loan (but only if it is the employer who is required to be a member of the fund), or
is available on the same terms to all employees who are also members.
Must not allow members or trustees to illegally access superannuation benefits early
It is illegal for individuals to set up a self managed superannuation fund to obtain early access to their superannuation without meeting a condition of release, such as retirement. Significant penalties apply to both the fund and the recipient if a benefit is unlawfully released early.

Before considering an early release of benefits, trustees of superannuation funds should seek independent advice from an Australian tax professional who is familiar with the superannuation legislation or note the warnings on the Tax Office website.

Provide information about the fund on request
Trustees must comply with their obligation to provide relevant information about their fund on request. This includes requests from members for additional information.

Assure the fund’s operational framework
Trustees of superannuation funds need to ensure that the fund’s operational and IT systems can service their requirements under choice of superannuation fund in a robust and efficient way, without increasing the fund’s risks. The fund should have a risk-management strategy that explicitly addresses these requirements, both at the time of trustee licensing by APRA and subsequently.