Tax, What's New
Published on June 13, 2019 12:49 pm, by Pete Lalor
You might have seen some commentary in the media over last month or so about low balance and “inactive” superannuation accounts and insurance. Maybe you haven’t. 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 “low balance” and “inactive” superannuation accounts to the Australian Taxation Office. The ATO will then try to consolidate these accounts into the members “active” superannuation account automatically.
Superannuation trustees must also ensure that “inactive” accounts are not charged insurance premiums.
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.
What you should do
What’s the fuss about?
First, 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.
Second, it should 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 these unintended duplicated super funds cost members about $2.6b a year.
But there are also some potential problems. 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 superannuation account to keep the insurance benefits or are taking a career break of some sort.
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.
Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.