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March 4th, 2019
Parliament passed two important bills relating to superannuation in February, which affect both employers and fund members.
The Treasury Laws Amendments (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Bill 2017 includes an amendment to curb some of the activities super fund providers use to encourage employers to offer their product as a default option to employees, for example invitations to hospitality events.
The “treating employers” amendment is a result of the Royal Commission’s recommendation, but has been bolstered to ensure that certain banking practices are caught. This amendment expands the provision to capture situations where, for example, employers may be indirectly influenced by being given a discount for other (bundled) services and cross-selling.
The Bill now addresses the giving of or allowing, either directly or indirectly, monetary or non-monetary benefits relating to the supply or proposed supply of goods or services to a person or a relative of a person. (‘Person’ now has a broad meaning to include a political or corporate entity as well as an individual.)
The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 will affect members with inactive super accounts. The law 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. This is 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.
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:
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 or your employees have any queries on this new legislation, contact our Member Services Team on 1300 360 988 or mail@firstsuper.com.au.
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