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Published on 4 Oct, 2023

What is a Superannuation Standard Choice Form?

Written by:
Thomas S Phabmixay
General Manager

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Super Choice, short for Superannuation Standard Choice Form, is used to let employers know their employee’s selected superannuation fund.

Superannuation funds, often referred to as super funds, are a type of fund that employers put money into during an individual’s working career, in order to build up sufficient funds to sustaint them in their post-retirement lives. These financial allocations are recognised as superannuation contributions.

Understanding superannuation options for employers

It’s important that employers pay their employees’ super contributions into the right superannuation fund, and the tool that allows them to do this is known as Super Choice. Super Choice empowers employees to have a say in how their retirement savings are managed. Here’s when and why employers should use it:
  • Welcoming new employees: The Superannuation Standard Choice Form allows new employees to select which super fund they would like their employer to pay contributions into.
  • Addressing employee requests: If an existing employee who is eligible wants to switch their super fund, the Superannuation Standard Choice Form is the means to facilitate this change. It ensures their contributions are redirected to the new chosen fund.
  • Navigating compliance issues: There might be situations where contributing to an employee’s designated super fund is not possible due to compliance problems or changes in the fund’s status. In such cases, the Superannuation Standard Choice Form is used to redirect contributions to a compliant alternative fund.
  • Transitioning default funds: If a decision is made to change the default super fund, whether due to business considerations or industry shifts, the Superannuation Standard Choice Form helps inform and involve the relevant employees. This ensures they are aware of the transition and can make informed decisions about their super fund.
In summary, the Superannuation Standard Choice Form allows employees to select and manage their super funds according to their financial objectives. It’s crucial for employers to use this form to ensure compliance and provide employees with the ability to make informed decisions about their retirement savings.

What employees need to know about super choice

If you’re an employer, it’s crucial you contribute the right amount to your employees’ chosen superannuation fund. To identify the correct fund for these contributions, the Australian Taxation Office (ATO) has designed a form known as the Super Choice Form.

When bringing a new employee onboard, you’re required to use the super standard choice form. This form lets eligible employees select their preferred super fund. While most employees usually have a preferred fund, it’s important you fill in your chosen default fund (sometimes referred to as the ‘default fund’) before handing over the form to the employee.

You can obtain a superannuation standard choice form from the ATO’s website. 

What is a stapled superannuation fund?

If new employees don’t pick a super fund, the ATO might make you do an additonal step in order to comply with the rules for choice funds. In this case, you the employer, would likely have to ask the ATO for the stapled fund details. A stapled super fund is like an old super account that’s tied to a person, sticking with them when they switch jobs. This helps avoid unnecessary additional fees from accuing by stopping new super accounts from being created each time someone starts a new job.

If an employer asks for a stapled super fund, the ATO will tell the employee and share the fund details. To learn more about stapled super funds, check out the ATO’s website here.

What is a stapled super fund request?

A request for a stapled super fund allows employers to inquire about the default superannuation accounts of their workforce. If an employee doesn’t specify a preferred fund, the stapled super fund is where the employer’s super contributions go. After the request is handled, the employer is provided with a summary detailing the results for each employee’s stapled super fund status. As of now, this procedure is facilitated through the ATO’s online platform, although efforts are underway to develop specialised business software to make the process more efficient.

How to complete the Superannuation Standard Choice Form

When it comes to organising your superannuation contributions, understanding the various methods available for completing the super choice form is crucial. Here’s a step-by-step guide:
  • ATO Online Services through myGov:
    • Navigate to the ‘Employment’ tab to locate the Super Choice Form.
    • Required Information: Employer’s Australian Business Number (ABN) and the Unique Superannuation Identifier (USI) of your chosen superannuation fund.
  • Payroll software with employee onboarding feature:
    • New employees can use their employer’s commencement-enabled payroll software to make superannuation contributions to their existing or stapled fund.
  • Standard Choice Form via ATO website:
    • Employees can download the Superannuation Standard Choice Form directly from the ATO site.
    • Important: Do not send the completed choice form to the ATO; hand it over to your employer for action.

Multiple super funds and default fund options

  • Employees can either choose to pay super contributions to an existing super fund or go with their employer’s default fund.
  • If you don’t make a choice, your super contributions will automatically go into your employer’s default super fund.

Eligibility & further notes

  • This form is primarily for new employees, but existing employees can also use it to change their super fund.
  • Employers are responsible for paying super contributions into the super fund chosen by the employee unless specific circumstances dictate the use of the employer’s default fund.

Additional resources: For the legal requirements, retirement benefits, or advice on superannuation contributions and funds, visit the ATO’s website or seek professional advice.

Superannuation fund categories

There are five primary categories of super funds: industry-based funds, retail-oriented funds, funds for the public sector, funds tailored for corporations, and self-directed superannuation funds. Each of these caters to specific needs and circumstances of individuals.

Industry superannuation funds

These funds are generally accessible to all, although they are particularly tailored for employees in specific industries. Employers who operate under certain industrial awards often register with these funds to make superannuation contributions for their new employees.

Retail superannuation funds

Operated by financial institutions, retail super funds are open to the general public. Super contributions can be managed through payroll software, and these funds often provide a super choice form for standardising contributions.

Public sector funds

Typically intended for employees within the Commonwealth, state, and territory government sectors, these funds may offer unique options. Employers in this sector may offer defined benefit funds and Constitutionally Protected Funds (CPFs) as part of their superannuation standard choices for their employees.

Corporate funds

These are exclusive to individuals employed by specific corporations, like investment firms or banks that specialise in wealth management. Corporate funds often provide defined benefit fund options to their members, and new employees usually complete a standard choice form upon employment to select their preferred fund.

Self-Managed Superannuation Funds (SMSFs)

Unlike traditional superannuation funds, Self-Managed Super Funds (SMSFs) place the responsibility of management, including investment choices and legal obligations, on the member who serves as the trustee.

Before establishing an SMSF, consult with financial professionals such as financial advisers or accountants who have expertise in superannuation. This is crucial due to the significant financial commitment and because SMSFs aren’t appropriate for every financial context.

Pros of SMSFs

  • Investment Freedom: SMSFs provide more investment options.
  • Potential for Higher Returns: There’s a chance to gain higher returns compared to other superannuation fund types.

Cons of SMSFs

  • Higher Operating Costs: SMSFs usually cost more to manage and maintain than other superannuation funds.
  • Regulatory Obligations: The trustee bears a significant regulatory burden.
  • Contribution Limits: Concessional contributions to SMSFs have a cap.
  • Increased Risk: The risk factor could be higher with SMSFs compared to other types of super funds.
Due to the complex regulations and requirements, overseeing an SMSF involves not only a financial commitment but also significant time and specialised knowledge. It’s crucial to evaluate your own financial situation and consult with experts before deciding on this type of superannuation fund.

Case Study : A complying Division 7A loan agreement

Scenario

Peter operates a Pty Ltd company that sells computers and IT accessories. This year, the business had a highly successful year, generating a substantial net profit of $500,000. Peter, the business owner, has already paid himself a salary of $200,000 this year, putting him in the highest tax bracket of 47%. The company has a net profit of $500,000 and has $420,000 in its bank account. Peter wishes to withdraw $300,000 from the company for personal use. To facilitate this, he has approached us to arrange a complying Division 7A loan agreement.

Strategy

To address Peter’s financial needs, we have proposed a complying Division 7A loan agreement with the following terms: a seven-year loan with an interest rate benchmarked at 8.27%, as per ATO guidelines in November 2023. It’s essential to note the interest on this loan will be treated as income for the company, and Peter will not be able to claim it as a tax deduction. To ensure compliance with Division 7A rules, Peter must commit to making minimum loan repayments, including both principal and interest, and repay the entire loan amount within the specified seven-year term.

Outcome

With this strategy in place, Peter can access the required $300,000 for personal use. By adhering to the terms of the Division 7A loan agreement, including timely repayments and full repayment within seven years, he will remain compliant with Division 7A rules, avoiding any breaches.

Tax considerations

The Division 7A rules ensure that loans between a company and its shareholders or associates are properly managed for tax purposes. In this case, the interest on the loan will be treated as income for the company, and Peter cannot claim it as a tax deduction. It’s important to be aware of these tax implications when using a Division 7A loan.

Next steps

To obtain your Division 7A complying loan agreement, take action now. Click here to order and set yourself on the road to financial stability and peace of mind. Don’t miss out on this crucial step in effectively managing your finances.

Next Step is to Contact TMS Financials

TMS Financials provides you with a team of experienced professionals that help you achieve your financial goals through smart tax structures and strategic financial structuring. We’re a one-stop shop for all financial needs and pride ourselves on building strong partnerships with our clients.

Book a free financial health review to see the difference we can make in your financial future.

Book a free accountant consultation with TMS CPA Accountants your specialists in Sydney Australia.

Disclaimer

This outline is for general information only and not as legal, tax or accounting advice. It may not be accurate, complete or current. It is not official and not from a government institution. Always consult a qualified professional for specific advice tailored to your unique circumstances.

Confused about navigating your superannuation options?

Don’t leave your financial future to chance-schedule a free consultation wit TMS Financials today.
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