Australia Enacts Superannuation Protections

Australia Enacts Superannuation Protections

Australia's new “Protecting Your Superannuation” law, effective 1 Jul 2019, will present implementation challenges for pension funds, which must send notices to members in April and/or May 2019.

Highlights of the changes include the following:

  • Insurance restrictions on inactive accounts. Superannuation funds will be restricted to providing insurance on an opt-in basis for accounts that haven’t received a contribution for at least 16 months, up from 13 months. Technically, this also applies separately to MySuper and Choice components, presumably requiring a decision on which component the insurance is attached.
  • A new Australian Tax Office (ATO)-based consolidation process. All inactive low-balance accounts must be transferred to the ATO. These are accounts that:

─     Have a balance of less than AUD $6,000

─     Aren’t related to a defined benefit interest

─     Don’t have insurance

─     Haven’t received a contribution in the previous 16 months

─     Don’t meet a condition of release specified in regulations that are yet to be published

─     Haven’t experienced (after the amendments) any of the following extra activity tests in the previous 16 months:

−     A change in the member’s choice of fund investment options

−     Changes to the member’s choice of insurance coverage under the fund

−     Nomination or amendment of a binding beneficiary

−     Written member notification to the ATO that the member wasn’t a member of an inactive low balance account

−     An amount due to the fund for a member, for example, superannuation guarantee contributions

The ATO will be given powers to reunite ATO-held accounts with an active account in the member’s name if the consolidated balance would amount to AUD $6,000 or more. Also, the amendment requires the ATO to transfer any balance to an eligible active account within 28 days of identifying the account.

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