Posted on August 21st, 2019
I want to talk this week about some interesting news on superannuation that could have a potential bearing on numerous of our clients.
New legislation passed by the Federal Government in February 2019, enacted new rules and regulations relating to superannuation, which will affect what has been called ‘inactive superannuation funds’. The changes passed will come into effect as of 1 July 2019.
The changes relate to superannuation fund members who have not had any contributions made to their accounts for a period of 16 months (regardless of the balance in the Account) and also to accounts with a balance of less than $6,000.00.
The changes are designed to protect Australian’s superannuation savings from being eroded away by fees and charges and insurance premiums. These accounts have broadly been referred to as “inactive superannuation accounts”.
As from 1 July 2019, superannuation accounts where no contributions, including rollovers, have been made to any such account/s for a period of 16 months, will have any insurance cover provided for, cancelled automatically. If you have an account that falls into this category, you should receive a notice from your fund asking whether you want to maintain your insurance cover. This should occur in May or June of 2019 (presuming of course that the Fund has up to date contact details for you).
If you receive such a notice and do not respond and actively choose to keep the insurance cover, then it will be cancelled on 1 July 2019.
You should be aware that if your insurance cover is cancelled and you later want to recommence any insurance cover via your Superannuation Fund, then it might be more difficult to do so. This is because any application to recommence any insurance cover will likely be subject to underwriting and other more stringent conditions (such as a medical examination), as opposed to you being able to have the insurance cover that is generally available as a matter of course through your Superannuation Fund.
Most Superannuation Fund members are able to take out Death (Life Insurance), Total and Permanent Disablement and Salary Continuance (Income Protection) cover through their Superannuation Fund.
Whilst you can also arrange these types of insurance covers yourself via an Insurance Company, the Superannuation Funds are generally able to acquire these types of covers at premiums that are, in most cases, significantly cheaper than what you can obtain yourself. This is because the Superannuation Funds are able to purchase these types of insurance covers in large quantities for a large number of their members.
Further, from 1 July 2019, all inactive superannuation accounts with a balance of $6,000.00 or less, will be transferred to the Australian Taxation Office (ATO), unless, within the previous 16 months, you have:
* Provided written notice to the ATO, declaring that you are not a member of an inactive low balance account;
* Changed your Investment options;
* Made changes to your insurance cover;
* Made or amended a Binding Beneficiary Nomination; or
* The Superannuation Fund is owed an amount in respect of your account.
Once monies are transferred to the ATO, the ATO will seek to allocate the account balances into an active account of the member, if such an account exists. It is important to note here that, in the first instance, the inactive accounts will leave the relevant Superannuation Fund and be paid to the ATO.
If you are a member who will be affected by this change, then again you should receive correspondence from your fund advising that this is to happen (again presuming that the Fund has up to date contact details for you).
If you fall into this category and you do not wish the ATO to take control of your superannuation account, then you will need to write to the ATO electing to maintain that superannuation account with your chosen Fund.
You might fall into this category if you have opened a new superannuation account with a different Superannuation Fund as a result of a change of employment and have not rolled over your superannuation into your main superannuation account.
We thought that providing information about these changes might be of benefit and relevance to some of our clients, even though it is not an area that we specifically deal in.
We do however regularly talk to clients about superannuation matters when discussing Estate Planning matters. It is understood that many people still have a number of superannuation funds (as opposed to having rolled their superannuation over into one main fund).
Macdonald & Michel Solicitors
07 4972 3644