A new measure will ensure that significantly more unclaimed super will go to the Australian Tax Office (ATO). The decision to lower the threshold at which lost superannuation accounts are automatically transferred to the ATO was announced on Monday as part of the Mid Year Economic Financial Outlook (MYEFO).
Currently, if the owner of a superannuation account cannot be contacted, and the account holds less than $200, or there have been no contributions for at least five years, the account is transferred to the ATO.
In the new plan, which starts in January 2013, the account will be transferred to the ATO if there is less than $2000 in the account, or if no contributions have been made for at least one year.
At the moment the money in Australia’s lost super accounts adds up to about $17 billion. Should it be passed by parliament, this new policy will add $675 million in savings to the Federal Budget over the next four years.
All unclaimed money will be held in a trust by the Government until it is reclaimed. The Government will then pay interest equivalent to inflation on the unclaimed super, so that those who find their lost super do not lose money.
As soon as I heard that the Tax Office was going to take my super I was up in arms. How dare it? In the (not unlikely) event that someone at my super fund was incompetent enough to find themselves unable to contact me, the Government was just going to waltz in and take my money. The cheek of it!
Then I actually read the details, and I realised that this was a really, really good development. I had a knee-jerk reaction to a very clever piece of policy, which helps both the Federal Budget and me (and you, and your friends, and the people you don’t like very much but still say good morning to anyway, and everyone else).
Lost super accounts, especially those with small balances, usually end up empty anyway, because of the extraordinarily high fees and extra payments extracted by super funds. When the ATO comes in and takes over the account, it holds on to the money, it doesn’t charge you any fees, and if you do ever decide to reclaim it, the ATO even gives you the money plus the inflation back, without charging you a cent. That, to me, seems really clever. Now the interest on all that lost super will go to the Government, instead of to the private sector.
So what’s the catch? If you have purchased insurance through your super fund, it will become invalid once the ATO takes over your lost account. And since the reason it is classed as ‘lost’ is that they can’t contact you, you may never know your insurer has ceased to cover you. So be aware, even if you do reclaim lost super, you’ll need to reinstate your insurance separately.
If you think you may have lost super, you can find it using the ATO’s SuperSeeker tool, which searches for any lost super for you.
Have you ever managed to reclaim lost super? How difficult was it? And do you think the Government had the little people in mind when it made this decision, or was it driven by greed?