The way in which we are reunited with our lost or inactive superannuation accounts may soon change following new proposals made by the Government. As part of its recent Mid-Year Economic and Fiscal Outlook (MYEFO), the Government has proposed more lost super be moved out of super funds and over to the Australian Taxation Office (ATO). So how does this affect those looking for their super, particularly young adults?
There is currently around $17 billion sitting in 3.4 million lost super accounts. Super becomes ‘lost’ because, among other causes, members change jobs or addresses without telling their funds. The most vulnerable are of course part-time and casual employees as well as younger workers who have small balances accumulated from a number of different employers.
What currently happens to lost super?
The current rules require that your super fund reports you as a lost member if the super fund:
- has not been able to contact you;
- has not received any contributions or rollover amounts for you in the past five years; or
- has received your super money after being transferred from another fund as a lost member account and no new address has been found.
In the three circumstances listed above, the Australian Tax Office (ATO) maintains a register of reported lost members, but your super fund still retains your super money, except in two specific circumstances when it must be paid to the ATO. These are when:
- the super account has a balance of less than $200; or
- the super fund has not received an amount in respect of a member for the past five years and the super fund, given the information available is satisfied that it will never be possible to pay an amount to the member
More of this lost super money is to be moved to the ATO
The Government has proposed to implement further reforms to preserve the value of lost member accounts in the super system.
What does it mean for super fund members?
The period of inactivity before an account of an unidentifiable member is required to be transferred to the ATO will be reduced from five years to 12 months.
If you, your children or grandchildren have super spread across various accounts, it will be important to consolidate your super accounts in the next six months.
What does this mean for super funds?
The account balance threshold below which inactive accounts, and accounts of uncontactable members, are required to be transferred to the ATO will be increased from $200 to $2,000 to ensure they are properly protected from being eroded by fees and charges. Interest will also be paid at a rate equivalent to Consumer Price Index (CPI) inflation from 1 July 2013 on all lost super accounts reclaimed from the ATO.
These reforms are aimed at reducing the number of super accounts that have members that can’t identify by reducing the period of time that a super fund can hold the account of that member. The Government is hoping that this will encourage funds to collect sufficient information to identify members during the period when contributions are being made.
The reforms are proposed to take effect from 31 December 2012.
How to find lost super
The Government has already put in place a number of initiatives through the ATO in recent years to help reunite members with lost super accounts.
The process for consolidating lost super has been improved with a simple online form that can be accessed through SuperSeeker or by calling the ATO on 13 28 65.
The best way for you to avoid losing super is to ensure that your super fund has your tax file number. Consolidating super accounts will ensure you make the most of your retirement savings and avoid paying unwanted fees.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
