‘Rorts and rip-offs’ targeted as new super bill enters parliament
The government has introduced a bill into Parliament containing a raft of reforms aimed at removing excessive fees and inappropriate insurance arrangements in super as well as boosting the ATO’s consolidation regime.
As part of the 2018 federal budget, the government announced it would be strengthening the ATO’s consolidation regime by requiring the transfer of all inactive superannuation accounts where balances are below $6,000 to the ATO, where they will then be reunited with active accounts.
It also announced plans in the budget to introduce a 3 per cent annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000 and a ban on exit fees on all superannuation accounts in order to better protect superannuation balances.
In a public announcement, Minister for Revenue and Financial Services Kelly O’Dwyer said that Treasury Laws Amendment (Protecting Your Superannuation Savings Package) Bill 2018, which details these various measures, has now been introduced into Parliament.
The bill, Ms O’Dwyer said, will help to combat the undue erosion of superannuation balances through excessive fees and inappropriate insurance arrangements and “protect the hard-earned superannuation savings of millions of Australians from rorts and rip-offs”.
“The reforms will also, for the first time, provide the Australian Taxation Office with the ability to proactively reunite Australians with their low-balance, inactive accounts,” the minister explained.
The government’s changes also prevent trustees from charging exit fees when members close or roll over their superannuation accounts, no matter their balance.
“These changes will help to prevent erosion of low-balance accounts by high passively incurred fees, and will remove a disincentive to superannuation fund members consolidating and closing unwanted accounts,” the minister said.
Under this bill, fund trustees will also be required to provide insurance on an opt-in basis only to new members aged under 25 years, members with account balances below $6,000, and members with inactive accounts, unless a member has directed otherwise.
“This will better target default insurance cover and prevent inappropriate erosion of retirement savings by insurance premiums for cover [that] members do not know they have, that goes beyond what they need, or which they cannot even claim on,” Ms O’Dwyer said.
“Importantly, members will still be able to obtain insurance cover within their superannuation if they choose to do so — young, inactive and low-balance account holders will still be able to opt in to insurance through superannuation.”
Ms O’Dwyer said the bill will also further protect accounts below $6,000 from fees and charges by requiring them to be transferred to the Commissioner of Taxation if they have been inactive for a continuous period of 13 months.
“The government will empower the commissioner to then proactively pay these amounts, plus those lost accounts already held by the ATO, into the rightful owner’s active superannuation account,” the minister said.
“This will increase the rate of account consolidation across the superannuation industry, reduce the number of inactive low‑balance accounts at risk of erosion and reduce insurance premium and fee duplication for many members.”