Don’t lose track of your super as new laws take effect

New laws set to take effect will see some accounts paid to the ATO.

woman with laptop

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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    COMMENTS

    To make a comment, please register or login
    debs
    13th Jun 2019
    10:41am
    I removed my super From MAPFUNDS super. They were charging higher admin fees than they were earning from my super. Negative earnings!!I get much more now just with ING
    jackie
    13th Jun 2019
    11:06am
    OMG! That means retirees who have $6000 and under lose out because the Government takes it all.

    The Liberal Government taking from the poor to give to the rich again. This is blatant theft. I hope those people close their Super accounts immediately instead of allowing the Government to help it self to their money.
    Maggie
    13th Jun 2019
    11:38am
    People need to take responsibility for themselves. There's been plenty of discussion about super funds for ages now and plenty of advertising on TV to make people think about it. Yet over and again we see folks being interviewed on TV who haven't a clue which fund they belong to!
    And actually in the interest of objectivity was there not a mention of how the ATO would try to sort this out for taxpayers.
    Oh sorry, you are a dyed in the wool party supporter so I am probably wasting my time. Forgotten Shorten's lovely tax plan already?
    jackie
    13th Jun 2019
    11:55am
    Maggie, I do not support blatant theft. I remember a time when people used to leave a small amount of money in their bank accounts and never touched it for years. That money used to accumulate and they took it when they were ready.

    That was until Governments and banks got greedy and corrupt.

    What people do with their hard earned money should be their business, not this Government. As long as they pay taxes that is all that should matter.

    If this Government is serious about the deficit it would close all the legal tax evasion loopholes instead of robbing the poor.
    Anonymous
    13th Jun 2019
    11:56am
    Settle down, jackie, the super funds are being held in trust by the ATO until the rightful owner makes a claim. Nowhere in this article was it said, or even hinted at, that the government would receive the funds for their use.
    Anonymous
    13th Jun 2019
    12:04pm
    Oh please jackie, how does transferring unclaimed bank accounts that have not been operated on for 7 years make banks and governments corrupt? As with super funds held by the ATO, anyone can claim their transferred funds at any time.
    KSS
    13th Jun 2019
    12:34pm
    jackie you really do need to take a few deep breaths before firing off your ill considered comments. I grant you YLC does tend to catastophise every single issue and place the worst possible slant on things but you do need to be more discerning.

    Neither the Government nor the ATO are taking anything away from the account holder. These are accounts that have had no activity at all for a prescribed period of time. For the last few years people have been able to find lost accounts and claim them if they find anything. Nothing will change in this except the money will be held in trust by the ATO. The owner can claim it back at any time.
    KSS
    13th Jun 2019
    12:38pm
    I agree Maggie. People do need to be responsible for their own money. As you say for quite some time now, there has been information about this everywhere. The Government even set up their moneysmart website so people can go there and find lost accounts.

    https://www.moneysmart.gov.au/tools-and-resources/find-unclaimed-money

    No one is taking anything.
    Sceptic
    13th Jun 2019
    2:26pm
    Don't hold your breath for a mea culpa from Jackie, KSS. HER response is just par for the course.

    13th Jun 2019
    12:06pm
    Will the ATO pay interest on the transferred funds? Seems that the mythical deeming rate would be a good start.
    pedro the swift
    13th Jun 2019
    1:02pm
    The gov. will use these transferred funds as collateral for further loans. i am willing to bet that since these funds are already low value and not being accessed by the owners the gov, will get to keep them. If the owners aren't ready to access them now why would they in the future?
    Sceptic
    13th Jun 2019
    2:29pm
    I suppose that you consider, Pedro, that it is better to leave the money with the funds, to deduct fees and insurance premiums that can never be claimed upon. The owners should consolidate their Superannuation balances and pay one set of fees and one insurance premium if they so desire. Anything else is sheer laziness.
    GeorgeM
    13th Jun 2019
    8:24pm
    Nothing wrong with the ATO holding low balance amounts in a trust fund till claimed by the owner to avoid them being eaten up by fees. However, my only issue is how much effort is made to contact the owner, either by the Super Fund or by the ATO, before this happens.

    Also, the criteria "‘Inactive’ means there have been no contributions or changes in investment or insurance options for 16 consecutive months." is a cause for concern especially for many retired people who cannot contribute any more, and may not want any "changes" yet their money is being arbitrarily moved elsewhere. Again, the issue is that this appears to be a plan for automatic action, without contacting the owner.
    There needs to be further clarification of this arbitrary approach without attempting to contact the owner - wonder whether someone / YLC could get that clarified?
    professori_au
    14th Jun 2019
    12:47pm
    When I was in the public service I wrote a commentary on super that recommended the funds needed to be held in a separate account that could not be touched by governments. I also pointed out that many employees working for small businesses or only working for short periods could be in a position of losing their super funds, should the employers not ensure the money went into the funds. At the time of setting it up, there was not a sound structure that ensured all moneys were paid into a fund.. Splitting super into different super funds was also a potential for a loss of super funds, e.g. working in different employment areas where a different supper annuation fund operated. In addition was a need to ensure that the funds were not used for get rich quick investment but should be invested in secure areas. As we have seen over the years super companies have lost large amounts of moneys as a result of poor investment.