Government takes action on inactive accounts

Parliament passed new laws relating to superannuation in February, which will affect members who have inactive super accounts.

The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 looks to automatically consolidate (or combine) inactive low-balance members’ balances through the Australian Taxation Office (ATO) to prevent their savings from being eaten into by fees or other charges.

An inactive low-balance member has been defined as someone who hasn’t made a contribution to a particular super fund account for 16 months or more, and has an account of $6,000 or less. However, there are several activities (listed below) that will stop the member from being considered inactive.

The time period for an inactive member has increased from the originally tabled 13 months to 16 months to take into account periods when super contributions may stop temporarily (for example, due to career breaks for the likes of maternity or parental leave).

The new treatment of inactive low-balance accounts means affected members risk losing out on valuable insurance cover and future investment returns when the balance is transferred to the ATO and the account closed.

As First Super has members who work in a range of high-risk occupations and who have families younger than white-collar sectors, for whom the insurance is valuable, we have concerns about this auto-consolidation move.

Activating an inactive account

In some cases, the value of the insurance cover within an inactive super account alone could be worth taking steps to keep it.

A member’s account may still be considered active – and not transferred to the ATO – if they undertake any of the following activities:

• change their investment options under the fund;
• make changes in relation to their insurance coverage under the fund;
• make or amend a binding beneficiary nomination;
• write to the Commissioner, declaring that they are not a member of an inactive low-balance account.

First Super will shortly be running a campaign to make our inactive members aware of what they could lose if their account is transferred to the ATO, as well as information and materials to help them keep their account if it’s right for them.

If you have any queries on this new legislation, please contact our Member Services Team on 1300 360 988 or mail@firstsuper.com.au