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New Super Laws

Protecting Your Super

The federal government has recently passed new laws that are designed to protect small inactive super accounts and reunite more members with their super.

The new rules which take effect from 1 July 2019 will

Click here or scroll to the end of this article to learn more about the new laws.

The ATO’s new consolidation program will expand on AUSfund’s long history of successful cross fund matching by introducing auto-consolidation to the full universe of superannuation funds.

 

How will this impact my AUSfund account?

As eligible rollover funds (ERFs) like AUSfund are designed to look after unclaimed super until it can be returned to members, many accounts automatically qualify as ‘inactive low balance’ accounts. ERF balances are typically low, accounts don't receive regular top-ups that would qualify them as 'active' and none of the exclusion activities apply due to the way these funds operate.

If your AUSfund account meets the definition and we haven't been able to cross fund match it into your industry fund account, we will be required by law to transfer your account to the ATO

The ATO will then try to reunite it with your active account, along with any other super they hold for you. If you don't have any other active super accounts to transfer into, you will need to contact the ATO to claim it. While it remains at the ATO, it will only earn an inflation rate of return until it is returned to you.

The first transfer of accounts to the ATO will take place in October 2019.

If you do not want your AUSfund account to be sent to the ATO, you can

 


Key facts and figures

The ATO will soon hold 11 million accounts totalling over $11 billion dollars of members’ super

 

Why is consolidation important?

A recent investigation by the Productivity Commission4 found that approximately one third of all super accounts, roughly 10 million accounts, are unintended multiple accounts created when members change jobs and don’t tell their new employer about their existing super funds, leading employers to create new accounts in their default funds.

Much like having your new employer open a new bank account for you in their preferred bank whenever you change jobs, every extra super account attracts fees that eat into super savings and compound costs over the longer term through lost investment earnings.

Most members remain unaware of the automatic insurance that comes bundled with default MySuper accounts and never tell their funds they don’t need these extra products. The policy premiums are also deducted from members’ super.

It is estimated that unintended multiple accounts collectively cost account holders $2.6 billion per year in unnecessary fees and premiums, and consistent under-performance of some super funds & products costs a further $1.2 billion a year in lost earnings.

Combining your super into a single account in a quality fund with a record of strong performance could boost your retirement balance by $79,000 for a 55-year old, and as much as $533,000 for a new job entrant retiring in 2064.

 

1. https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Multiple-super-accounts-data/
2. Item 5.46, Explanatory Memorandum to the Protecting Your Super Package
3. Senate Economics Legislation Committee, questions on notice, 28 February 2019
4. Productivity Commission Inquiry Report “Superannuation: Assessing efficiency and competitiveness”, 21 December 2018

New laws in detail

These laws affect all APRA-Regulated superannuation funds from 1 July 2019. You should check with your other funds to see how they may impact your other accounts.

Summary of new lawImpact on your AUSfund account 
INACTIVE ACCOUNTS SENT TO THE ATO

Funds will be required to send your account to the ATO if it is a ‘low balance inactive’ account, that is:

  • The balance is less than $6,000 and the account has had no contribution or rollovers within the last 16 months

Unless

  • The fund is owed an amount for you
  • You have life insurance cover
  • You have changed your insurance arrangement in the last 16 months
  • You have changed your investment options in the last 16 months
  • You have made or changed a binding death benefit nomination in the last 16 months
  • You have made an ATO Declaration* in last 16 months, which exempts your account from compulsory transfer

AUSfund accounts are subject to the compulsory transfer rules. The first transfer will occur in October 2019.

As AUSfund does not receive contributions and does not have insurance, investment choice or binding benefit nominations, members wishing to remain with AUSfund can only opt out of the transfer by completing the ATO Declaration* (once available).

 ATO AUTO-CONSOLIDATION 

The ATO will be able to proactively transfer any super they hold for you to your active account. They must transfer your benefit to your account within 28 days of finding your active account.

AUSfund can only accept transfers from super funds, it cannot accept super from the ATO under any circumstance.

If you do not have an active account in another fund, you will need to open one to receive your benefit or claim it directly from the ATO.

FEES CAPPED AT 3% 

If your account balance is less than $6,000 at the end of the current financial year, the total amount of administration fees, investment fees and indirect costs applied to your account are capped at 3% of the account balance.

AUSfund charges a pro-rated administration fee, levied on 30 June or when you exit the fund.

If your total fee exceeds the cap, it will be adjusted and any excess will be credited to your account.

EXIT FEES BANNED 

Funds will be banned from charging exit fees when you leave the fund

No change - AUSfund does not charge exit fees

INSURANCE CUT-OUT ON INACTIVE ACCOUNTS 

Default life insurance cover provided with your super account will automatically cut out if your account is inactive for more than 16 months.

No change - AUSfund does not provide insurance

*The ATO Declaration is a new form stating that you are not an inactive low-balance member. The Declaration will apply for a period of 16 months then lapse unless you renew it. 

Due to the short time-frame between the passing of the legislation and its commencement date, the Declaration form and processing options are currently being developed by the ATO. We will update this page as soon as these have been finalised.