You might have seen some commentary in the media over the last month or so about low balance and “inactive” superannuation accounts and about insurance in super. Maybe you haven’t. But some rules are changing on July 1 this year. If you’ve accumulated a few different superannuation accounts in your time, or you’re taking a career break or just haven’t done a good job of keeping your super and insurance organised it’s worth spending some time to understand what it’s all about. Here’s our take on the key points.
From 1 July 2019 superannuation funds must report and transfer super accounts that are both “low balance” and “inactive” to the Australian Taxation Office. The ATO will then try to consolidate these accounts into the members “active” superannuation account automatically.
Low balance accounts are accounts with a balance less than $6,000. Inactive accounts are accounts that haven’t received a contribution for 16 months or more.
From July 1 2019 superannuation trustees (they are the people who look after superannuation for members) must also ensure that super accounts that are “inactive” are not charged insurance premiums unless the member (that’s you) has agreed to them.
What can you do?
- If you think you might be affected by these changes and you have a financial adviser talk to them about the changes, otherwise:
- Review your superannuation accounts for “low balance” and “inactive” accounts
- If you want to keep a “low balance” or “inactive” fund to retain the insurance cover, or for any other reason, contact the fund and complete the relevant form to make sure your account isn’t passed to the ATO and consolidated or your insurance isn’t cancelled
- Use the mygov website to check for any “lost superannuation”
- If you want to consolidate your superannuation do it the way you want it done, rather than let the ATO decide how to do it
What’s the fuss about?
The issue getting most attention is the risk that super fund members will lose insurance benefits. This issue is especially significant for superannuation members who may have deliberately retained a duplicate superannuation account to keep the insurance benefits or are taking a career break of some sort and may have a low account balance or not be making regular contributions to the fund.
On the plus side, these changes should have a big impact on our superannuation system. There are currently about 30 million superannuation accounts – and 10 million of these are unintended duplicate accounts. These changes could significantly reduce the number of superannuation accounts in the system and reunite a lot of members with lost or forgotten accounts.
They should also save members a lot of money and give their retirement savings a significant boost. The Productivity Commission estimated that fees and charges and insurance premiums on these unintended duplicated super funds cost members about $2.6b a year.
This summary has been prepared by MoneyBrilliant Pty Ltd (AFSL 492711). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent. You may also be able to access additional information from the websites of the Australian Securities and Investment Commission (ASIC) or the Australian Taxation Office.