Protecting Your Super – New Rules for Low Balance and Inactive Accounts

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The superannuation and insurance sectors – along with the financial services industry in general – have been the focus of intense scrutiny in recent times.

Two catalysts for this have been the Productivity Commission’s review into superannuation, which assessed the efficiency and competitiveness of Australia’s super system, and the well-publicised Financial Services Royal Commission, which put a spotlight on misconduct in the superannuation, banking and financial services industry.

The findings of both emphasised the need for consumers to be better protected, particularly when it comes to Australians with low balances or those whose super accounts have become inactive.

Please click on the following link to view APRA’s Frequently Asked Questions relating to the “Protecting your super package”

The recent passage through Parliament of “Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019” requires all Registerable Superannuation Entity (RSE) Licensees to implement a number of reforms to address account erosion of balances due to excessive fees or unnecessary insurance from 1 July 2019.

This change is part of the Protecting Your Super Package that was announced in the 2018-19 Federal Budget prior to the Federal Election. For more detailed information on the budget read our Federal Budget Analysis: https//

Protecting Your Super package

A change that came into effect on 1 July 2019 is the Protecting Your Super (PYS) package. This package of reforms is designed to protect superannuation accounts from unnecessary erosion caused by insurance premiums and particular fees.

Here’s a snapshot of the PYS changes that are now in effect:

  • Super accounts with balances under $6,000 that are inactive – i.e. they have not received any contributions, rollovers or other transactions for 16 consecutive months – will be closed.  The funds will be sent to the Australian Taxation Office (ATO), to allow it to consolidate them with a member’s active account.
  • There is now an annual cap of 3% of the account balance on investment and administration fees, for all accounts with balances less than $6,000.
  • Exit fees are now banned, meaning super funds can no longer charge you a fee for moving all or part of your money to a different fund.
  • Super accounts with insurance and that are inactive for 16 months will have their insurance cancelled.

Steps to consider taking

If you have an inactive super account with insurance, think about whether you want to keep it. For example, some people may want to maintain a small super balance to cover insurance premiums, while others may simply be paying for something they no longer want or didn’t realise they had. If you do want insurance as part of your super, then it’s important not to let it lapse, unless you have other insurance arrangements in place.

It could also be a good idea to take a look at the fees that apply to your super fund. It’s possible that your provider may already charge you less than 3% in investment and administration fees, along with no exit fees. Other providers may charge account-based fees, so look at where you may be paying duplicate fees.

If you have an inactive account and want to keep things as they are (keep your insurance and/or keep your low-balance super account), you can:

  • Reactivate your super account, for example by paying money into it.
  • Notify your super fund that you want to opt in to keep your insurance, or opt out of consolidating your low-balance super account.

Improved superannuation contribution eligibility rules from 1 July 2020

In April 2019 the Treasurer, The Hon Josh Frydenberg also announced that the Government will improve a number of superannuation contribution eligibility rules from 1 July 2020.

The changes include:

  • Allowing individuals to make voluntary ‘Concessional’ and ‘Non-Concessional’ Contributions to superannuation up to age 66 without having to meet the work test;
  • Extending the age limit for ‘Spouse Contributions’ from 69 to 74;
  • Extending the age limit for the ‘2 Year Bring-Forward’ arrangements for Non-Concessional Contributions from 64 to 66.

Please note, these proposals are not yet law and any changes will require legislation to be passed by Parliament.

Please contact the Fintech Financial Services office if you have any questions about how these changes affect your personal circumstances.

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