16 / August / 2019

Got a low-value super fund? Here's how the 2019 superannuation changes could affect you...


Posted 16 August 2019

Got a low-value super fund? Here’s how the 2019 superannuation changes could affect you…

Article by Alex Cattel


On 1st July, the Australian government rolled out its 2019 superannuation changes. The good news is that you may see some benefits if you have one or more low-value funds.

The new laws prevent superannuation providers from eroding member balances with unwanted or unnecessary insurance and exit fees.

Inactive accounts with low balances will also be moved to the ATO, in an attempt to unite the unclaimed super with its owner.

We look at the main 2019 superannuation changes in more detail below…


The first 2019 superannuation change: insurance

Up until 30th June 2019, superannuation providers were required to provide members with appropriate life and total and permanent disability (TPD) insurance inside superannuation on an ‘opt out’ basis.

That is, the insurance was automatically put into place when you became a fund member.

For many people, such as young people with no dependants and those with insurance cover elsewhere, these default insurance premiums simply eroded their superannuation balances unnecessarily.

And, in many cases, people simply did not realise that they had insurance inside their funds.

The 2019 superannuation changes prevent super providers from maintaining ‘default insurance’ for any member with an account that has been inactive for a continuous period of 16 months unless they elect to maintain the insurance.

An inactive account is one where no contributions or rollovers have been received in the previous 16-month period.

For everyone else, insurance will remain a default on new and existing superannuation funds, unless you specifically opt out.


What to do if you are affected by this change

If you’re affected, you need to make a decision about whether the insurance held in your fund is of value to you.

Often, insurance cover through superannuation is cheaper than the cover you can access elsewhere. Also, the premiums are debited automatically from your fund so they don’t impact on your cashflow.

However, if the insurance is unnecessary or duplicated, the premiums will simply erode your account.

Employer default super funds generally provide death and TPD cover. This basic cover may be available without health checks.


What are your options?

You can usually increase, decrease, or cancel your default insurance cover relatively easily.

Your super fund’s website will have a product disclosure statement (PDS) that explains the insurer they use and details the cover available.

If you’re affected, the insurance you hold inside your super fund may be cancelled unless you take action (that is, if you have an inactive account, as per the above description).

You can choose to keep your insurance by contacting your insurer. Login to your insurer’s website and follow the links or call them to find out how to make the election – or simply make a contribution so that your super account is no longer classed as “inactive”.

Note that the election to keep your insurance cannot be made over the phone.

Your superannuation provider is obliged to let you know if your insurance is about to be cancelled.


The second 2019 superannuation change: Low balance accounts moved to ATO

Australians have over $17.5 billion in unclaimed superannuation.

From 1st July 2019, superannuation providers will be required to report and pay inactive low-balance accounts to the ATO.

Twice a year, super funds will need to report and pay:

  • Unclaimed super of members aged 65 years or older, non-member spouses and deceased members.
  • Unclaimed super of former temporary residents.
  • Small lost member accounts and insoluble lost member accounts.
  • Inactive low-balance accounts.

A “low balance account” is classed as one with less than $6,000.

These new rules mean that if your superannuation account has a balance of less than $6,000 and the account has been inactive for 16 months, it will be transferred to the ATO, who will attempt to consolidate your superannuation.


The third 2019 superannuation change: Reduced fees


From 1st July 2019, exit fees including fees on partial withdrawals have been abolished for all superannuation fund members, regardless of their superannuation account balance.

Where a fund member’s final account balance is less than $6,000 in a year, new caps also apply to the fees that providers can charge.

From 1st July 2019, administration and investment fees and other prescribed costs on these accounts are capped at three percent.

If the fund has charged more than three percent, the excess needs to be refunded within three months.


Affected by these changes and need to assess your options?

Please note that these changes do not apply to self-managed superannuation funds or small APRA funds.

But you may have low-value super funds that you haven’t yet rolled over to your main fund.


If you’re affected by these changes and would like to discuss your options, please contact us here.