Q: I have received a letter from my Super fund warning me that my Superannuation may be transferred to the ATO as an inactive account. What does this mean and what options do I have?
A: On 1 July a range superannuation legislative changes come into effect, designed to help people with low super balances and multiple accounts ensure their retirement savings aren’t adversely impacted by fees or insurance premiums costs.
An inactive Superannuation account is defined as an account that has had no contributions or rollovers into the fund for a continuous period of 16 months.
Under the government’s “Protecting Your Super package”, if you have a super account that has been inactive for 16 months with a balance of less than $6000, it will be transferred to the ATO.
The measure have been put in place to assist individuals who end up with multiple inactive super accounts as a result of changing their name, their address, their employer or having spent time living overseas.
Following the transfer, the ATO will hold your superannuation benefit without fees. Within 28 days of receiving your money, the ATO will attempt to transfer the benefit into your active super fund. If you do not have one, the ATO will hold the funds without cost until an active account is matched to your name.
Interest on unclaimed Super accounts is calculated based on the Consumer Price index rate which equates to a current return of 1.5% p.a .
If you have linked your MyGov account to the ATO, you will be able to see all your super accounts that the ATO have on record in the one place. Via the MyGov site you are able to consolidate your funds into your preferred active account, although follow-up paperwork may be required by some Superannuation funds.
There may be circumstances that you wish to keep an inactive account; for example if you have insurance that you wish to retain or a particular investment you wish to continue to hold.
If you wish to retain the insurance cover, you need to let your Superannuation Trustee know as soon as possible. If you do not advise the Trustee and your account has been inactive for 16 months or more with a balance of less than $6000, the Trustee will have no alternative other than to cancel the cover, close your account and transfer the proceeds to the ATO.
If your insurance is cancelled and you decide later to re-apply, you may need to provide further medical and employment information and be subject to full underwriting. This will be a major issue for those who are in poor health or are uninsurable due to age or circumstances such as unemployment. Once the insurance is cancelled, it is unlikely they will get it back.
The alternative to notifying the Trustee is to have a contribution made to your fund before the 16 months inactivity period elapses whereby your account will be considered active.