Client Alert – Protecting your super reforms from 1 July 2019
To protect the super balances of all Australians being eroded by unnecessary fees and costs, the Federal Government has introduced the “Protecting Your Super” reforms which passed parliament on 18 February 2019.
This new legislation will apply from 1 July 2019. It includes cancelling insurance for inactive members, changes to fees, and new powers for the Australian Taxation Office (ATO) to transfer and hold inactive, low-balance accounts.
Insurance within super cancelled for inactive accounts
Super providers need to cancel the insurance in any super account considered inactive. An inactive account is any account that hasn’t received any contributions or rollovers for more than 16 months.
Before taking action, your super provider must tell you that you’re at risk of having your insurance cancelled and give you the opportunity to choose to keep your insurance. You can stop your insurance being cancelled by letting your super provider know that you want to keep your insurance.
Making a super contribution (even as little as $1) or a rollover into an account that’s considered inactive will also stop the insurance cancellation from going ahead. Making regular contributions can also prevent an account becoming inactive again.
The legislated start date for this measure is 1 July 2019. If your account is identified as inactive your super fund must attempt to contact you before then to give you the opportunity to choose to retain your insurance.
Inactive super accounts with low balances will be closed
Many inactive accounts with a balance of less than $6,000 will be closed and the balance transferred to the Australian Tax Office. The ATO will then use data matching to connect these super accounts with an active account of the member where possible.
Cap on fees for accounts with low balances
Fees will be capped at 3% pa for accounts with $6,000 or less at year end.