Australian Government Department of Finance and Administration Superannuation Circular No. 2005/4 Superannuation Framework for New Australian Government Employees from 1 July 2005 Purpose This circular contains high-level information about the recent changes to superannuation arrangements for Australian Government employees and consolidates information previously provided. This circular replaces Superannuation Circular No. 2004/1. Target Audience This circular is relevant to Corporate, Human Resource and Finance areas of agencies1 in respect of Australian Government employees who are not eligible to resume or continue membership of the Commonwealth Superannuation Scheme (CSS) or the Public Sector Superannuation Scheme (PSS)2. Key Points 1. The Public Sector Superannuation Accumulation Plan (PSSAP) commenced on 1 July 2005. 2. In the period from 1 July 2005 until 30 June 2006: a) permanent (usually ongoing) employees who start employment in the period must join the PSSAP; b) temporary (usually non-ongoing) employees who commence employment or a new term of employment in the period can choose to join the PSSAP (temporary employee membership restrictions in the PSS do not apply to the PSSAP); c) temporary employees who commence employment before 1 July 2006 who are not PSSAP members (and persons engaged by Australian Government agencies under a contract that is wholly or principally for their labour) must have employer contributions paid for them under the Superannuation (Productivity Benefit) Act 1988 (Productivity Benefit Act); 1 This circular applies in respect of any employer of Australian Government employees or any approved authority, within the meaning of the Superannuation Act 2005, permitted to offer PSSAP membership to new employees. Other employers should contact the Department of Finance and Administration on (02) 6215 1666 to ascertain the specific arrangements that apply in their case. 2 For example, this circular does not apply in respect of a CSS or PSS member who has transferred to another Australian Government employer or, in some cases, a person who has an existing benefit in the CSS or PSS, such as a PSS preserved benefit. Employees should contact the CSS Board or PSS Board as appropriate to determine their eligibility for membership of the respective scheme. The Government will be giving consideration to the options that may be available for offering choice of fund to CSS and PSS members. d) employers can choose to offer choice to any or all PSSAP members and meet the choice of superannuation fund requirements in accordance with the Superannuation Guarantee (Administration) Act 1992. (SG Act - see below for details on the choice requirements). However, if an employer provides choice prior to 1 July 2006, the employee exercising choice must become a PSSAP member first; and e) employers are directly responsible for ensuring that they comply with the SG Act in respect of employees who are PSSAP members and those who have left the PSSAP because of choice3. 3. The diagram in Attachment A illustrates the superannuation arrangements that can apply to a person who commences employment during the financial year ending 30 June 2006. 4. From 1 July 2006: a) all new employees will be able to choose to join the PSSAP, but are not required to become members; b) employers must meet the choice requirements (see below) in respect of all new employees and all PSSAP members; c) the provisions of the Productivity Benefit Act will not be available to new employees. This is one year later than originally announced – employees covered by the Productivity Benefit Act (including eligible contractors and consultants) at 30 June 2006 may remain covered past that date, if their employment (or contractual) arrangements remain unchanged and they do not choose to be PSSAP members; and d) employers will be directly responsible for ensuring that they comply with the SG Act, including the choice requirements, for all new employees and PSSAP members3. Choice Requirements 5. An employer will be able to comply with the choice requirements under the SG Act4 if they contribute to a complying superannuation fund5 or retirement savings account (RSA): a) chosen by the employee provided this is a valid choice; b) that is the employer (default) fund where an employee was offered choice and did not make a valid choice (see below for more information on employer funds); or c) under or in accordance with a state industrial award or industrial agreement, or a federal certified agreement or an Australian Workplace Agreement. 6. An employer also meets their choice requirements in respect of employees who continue to be covered by the Productivity Benefit Act. In addition, the choice requirements for an employer are met in respect of PSSAP members until 30 June 20066. 3 Employers are obliged to contribute a minimum of 9% of an eligible employee’s earnings base to a complying superannuation fund or retirement savings account at least every quarter. 4 Further information about choice of fund for employees can be found at the Australian Taxation Office’s website on www.ato.gov.au/super. This includes details of how choice should be offered and how employees can exercise choice. 5 A complying fund is a superannuation fund that has elected to be regulated under the Superannuation Industry (Supervision) Act 1993. 2 Superannuation Circular 2005/4 Department of Finance and Administration 7. Further information about choice can be obtained by visiting the Australian Taxation Office’s website at www.ato.gov.au/super. The Employer (Default) Fund When Choice is Offered 8. From 1 July 2006, both permanent and temporary employees who are offered choice and do not choose a fund will have contributions paid into the employer fund. The PSSAP is the employer fund for persons employed under the Public Service Act 1999 and any other person declared by the Minister7. 9. Employers of other Australian Government employees who must be offered choice can select their own employer fund. This fund can be any complying superannuation fund which offers a prescribed minimum level of life insurance8 or RSA. The Productivity Benefit Act 10. Temporary employees who commence employment or a new term of employment between 1 July 2005 and 30 June 2006 who do not choose to join the PSSAP will have employer superannuation paid for them under the Productivity Benefit Act. 11. The Productivity Benefit Act allows employees (including eligible contractors and consultants) covered by that Act to choose one of a limited number of funds permitted under that Act. The Australian Government Employees Superannuation Trust (AGEST) is the default fund when an employee does not choose a fund. The choice requirements do not apply to employees to the extent they are covered by the Productivity Benefit Act. 12. Further information about the Productivity Benefit Act is available at www.finance.gov.au/super. Further information about AGEST is available from www.agest.com.au or by contacting 1300 724 378. Providing Information to Employees 13. Employers should provide new employees with sufficient information to ensure that they understand the superannuation options available to them. Discussion with employees on superannuation should be limited to superannuation as it relates to employment conditions. 14. Employers should provide information to employees regarding the PSSAP only as permitted by the PSS Board (which is licensed by the Australian Securities and Investments Commission (ASIC) to give general financial product advice on that scheme). Information about the PSSAP can be obtained by visiting the PSS Board’s website at www.pssap.gov.au. 15. Employees who have the option to become PSSAP members or have superannuation provided for them under the Productivity Benefit Act should be informed that they have the option of either arrangement. 16. ASIC has issued guidance about the role of employers in providing information to employees about superannuation in the course of their duties. ASIC’s updated guidance to employers about superannuation choice advice (QFS 156) is available on ASIC’s website at 6 Although not relevant to this circular, employers also meet the choice of fund requirements in respect of employees who are CSS or PSS members. 7 At this time no declarations have been made. 8 Further information about the default fund can be found at the Australian Taxation Office’s website on www.ato.gov.au/super. 3 Superannuation Circular 2005/4 Department of Finance and Administration www.asic.gov.au and on the Australian Taxation Office’s website at www.ato.gov.au/super. This guidance assists employers to ensure that the information they are providing does not constitute financial advice. Contacts 17. Employers can receive further information on choice at: the Australian Taxation Office’s superannuation website at www.ato.gov.au/super or by phoning 13 10 20. the Australian Securities and Investments Commission’s website at www.asic.gov.au or by phoning 1300 300 630. 18. For further assistance regarding matters in this circular, or suggestions to improve the information provided, agencies may contact the Superannuation Policy Branch of this Department at AGsuperreview@finance.gov.au or the Department’s choice inquiry hotline number on (02) 6215 1666. Sandra Wilson Branch Manager Superannuation Policy Branch Superannuation and Governance Division Financial Management Group 2 September 2005 4 Superannuation Circular 2005/4 Department of Finance and Administration Australian Government Attachment A Department of Finance and YES Administration Superannuation arrangements during 2005 – 06 for Australian Government employees who commence employment in that financial year Choice requirements under the Superannuation Guarantee (Administration) Act 1992 Prior to 1 July 2006, the employer may offer PSSAP Does the employer contribute Does the employer Is the employee The employee must to the default fund? a permanent YES join the PSSAP. members choice of contribute to a fund on superannuation fund. For employees employed behalf of an employee under (ongoing) under the Public Service Act employee? a state award or industrial Does the employer offer 1999, this will be the PSSAP. agreement or with a certified Other employers may select NO PSSAP choice? agreement or Australian their own default fund. Workplace Agreement? NO YES Is the employee Does the employee elect YES a temporary to join the PSSAP? YES YES YES NO NO (non-ongoing) (The employee can elect employee? at any time to join the PSSAP). Employer is NO complying with NO choice. Employer is complying with choice of fund Is the employee a The employee will be until 30 June 2006. contractor or consultant covered by the NO who is an employee Superannuation referred to under sub (Productivity Benefit) Act section 12(3) of the YES 1988. Employees who do Does the employer Superannuation Guarantee not chose a fund Employer is complying contribute to an YES YES (Administration) Act 1992? permitted under that Act with choice of fund. employee’s chosen must have contributions fund? This means a person paid to the Australian engaged under a contract Government Employees that is wholly or principally Superannuation Trust for their labour. (AGEST). Employer is complying with choice only in respect of PSSAP members until 30 June 2006. This diagram does not apply in respect of: insufficient employer contributions on behalf of employees to a superannuation fund or retirement savings account to meet the requirements in the Superannuation Guarantee (Administration) Act 1992; any employee who is a Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation Scheme (PSS) member or is eligible to resume membership of either of those schemes (for example, if the person has a PSS preserved benefit); any employment, or a term of employment, that commenced before 1 July 2005 or after 30 June 2006; and statutory office holders.
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