The Federal Government's protecting your super package came into effect on 1 July 2019. The legislation includes changes to fees, the transfer of inactive low-balance accounts to the Australian Taxation Office (ATO) and stopping insurance for inactive members.
This legislation means that superannuation funds are no longer able to provide insurance for a member whose account has been ‘inactive’ for more than 16 consecutive months. This includes any insurance for death, total & permanent disablement (TPD) and income protection.
An account is considered inactive where:
We have not received an amount paid into the account within the last 16 months; and
The member hasn’t communicated to us that they wish to continue to receive insurance benefits, despite otherwise holding an inactive account.
If you have an inactive account and would like to keep your cover, then you can do so in one of two ways:
You can activate your account simply by contributing to your super.
You can do this as a contribution or rollover, and it doesn’t matter how much the amount is, or who pays it.
Alternatively, you can provide us with an election in writing to keep your cover.
If your account switches from active to inactive we will notify you at 9, 12 and 15 months of inactivity to provide you with the opportunity to elect to maintain your insurance cover.
To allow for the consolidation of multiple super accounts that a member may hold across several super funds, superannuation funds are required to transfer ‘inactive low balance accounts’ to the ATO as at 31 October 2019 (or half yearly after that). If you have an inactive super account that has been transferred to the ATO, they will try and reunite that account with an active super account that you hold somewhere else (if the active account has a balance over $6,000). They’ll do this within 28 days of determining they are able to do so, after identifying your active account. Generally, the circumstances in which we may transfer your super account to the ATO:
Your account is less than $6,000.
We haven’t received an amount (such as a rollover from another fund or a contribution) to your account within the last 16 months.
We are not owed an amount in respect of your account.
You have no insurance cover.
You have not changed your investment options in the last 16 months.
You have not made or amended a binding death benefit nomination in the last 16 months.
If your super account is transferred, the ATO will keep your money safe and you’ll pay $0 in fees while your money is with them. However, you will not benefit from receiving any investment returns from your super fund. When you claim your super fund or it is matched with another account, any interest due will be paid to you. Interest is based on the consumer price index (CPI).
If you do not want your account to be transferred to the ATO, there’s some things you can do to stop it:
Combine your super accounts so that you have one fund with a balance of $6,000 or more.
If appropriate for your personal situation, elect to keep your insurance cover.
Choose who you want your super to go to and make a binding death benefit nomination.
Contribute to your super.
Review your investment options, and if applicable and appropriate for your personal situation, make a change to the investment options you are currently in. You can do this online >
Combine your super accounts so that you have one fund with a balance of $6,000 or more.
If appropriate for your personal situation, elect to keep your insurance cover.
There is a cap on administration fees and certain costs that members are able to be charged if their account balance is less than $6,000. This cap is equal to 3% of the member’s account balance. The cap aims to slow the rate of super being eaten away in fees on low balances.
In addition, regardless of account balance exit fees on all super accounts are prohibited. Exit fees were a reason why members haven’t wanted to consolidate various super accounts. Since consolidating your accounts saves on multiple fees for each account, this prohibition of exit fees means that there’s no downside to doing so.
It’s important for Vision Super members to be aware of these changes if you have a low balance or inactive super account. If you’re not sure if your accounts are affected, call us on 1300 300 820 and we’ll confirm whether you’re at risk of your insurance cover being turned off, or your super account being transferred to the ATO.
In each of these instances, we will also be communicating with you directly.
You can also find more information on the Money Smart website.