Superannuation fund members should look at their accounts before 1 July when a new law starts that requires funds to report and pay inactive low-balance accounts to the Australian Tax Office (ATO).
This change is in accordance with new Protecting Your Super legislation, which has been designed to ensure that people with multiple accounts are protected from having their total super balance eroded by fees and insurance premiums that are charged by each superannuation provider.
Super providers will be required to identify inactive low-balance accounts as at 30 June and report and pay the unclaimed super money by 31 October 2019.
Where possible, the ATO will proactively consolidate these inactive low-balance accounts into a member’s active account, on their behalf. But fund members are encouraged to take control of their own nest eggs and place such sums where it best suits them.
SelectingSuper, a superannuation information portal published by Rainmaker Information, recommends that consumers review their existing superannuation accounts, which can be done via MyGov, to ensure that their superannuation money is consolidated into the active account of their choice.
“The devil is in the detail with this upcoming automatic consolidation,” said Giovanni Munoz, head of technical services at Rainmaker Information. “At face value, this is a good thing for many fund members, who are currently getting hit with an array of unnecessary fees and costs.
“However, the way in which the ATO has been instructed to allocate the inactive, low-balance funds could lead to some detrimental outcomes for many Australians.”
The ATO will locate all accounts that have balances of $6000 or less and have been inactive for the past 16 months. ‘Inactive’ means there have been no contributions or changes in investment or insurance options for 16 consecutive months.
Within 28 days of receiving a fund member’s money, the ATO will transfer the money to the member’s active account – if they have one and if the combined balance will be greater than $6000. If an active account can’t be found, the money will remain with the ATO until it is claimed by the individual.
“One element not considered in this move is performance,” said Alex Dunnin, executive director of research at Rainmaker Information.
“This should be a wake-up call for consumers to take another look at whether their fund is delivering performance that will set them up for the retirement they want.”
Recent Rainmaker Information analysis found that the best performing fund in the market earned double the returns of the worst performing fund over the 10 years to June 2018. This means that a poor performing fund could cost the average member more than half a million dollars over their lifetime.
“Although members will be saving in fees, they might now be in a situation where they are wholly invested in a fund that will leave them worse off,” Mr Dunnin said.
Members can review the best performing funds over three, five and 10 years on such sites as SelectingSuper and Canstar to ensure they are consolidating into a fund that best suits their retirement needs.
Also from 1 July, funds must report and pay to the ATO twice a year:
- unclaimed super of members aged 65 or older, non-member spouses and deceased members
- unclaimed super of former temporary residents
- small lost member accounts and insoluble lost member accounts
- inactive low-balance accounts.
Are you sure you have kept track of all super funds? Do you welcome the new laws?
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