Written by Hudson Adviser Ivan Fletcher
The second wave of impact of the new Legislation (known as Protect Your Super)
is now under way with a; deadline of 31 October.
PHASE 1 - 30 June Deadline - Cancellation of Insurance on inactive Accounts
The Protecting Your Super (PYS) reforms took effect on 1 July and the first deadline (30 June) is now behind us – which impacted client who have insurance inside their Super. If your account is inactive for 16 months, insurance had to be cancelled by the super fund unless your OPTED TO KEEP the insurances by responding to your super fund when they presented you with this information and an OPT IN option to act on.
Reminder – This legislation is ongoing, so if you still have insurance inside a super fund and it accumulates 16 consecutive months of inactivity (ie no contributions at all), then your insurances will still be cancelled. Your Super fund is still required to warn you as you approach the deadline and if you do not respond insurance will be cancelled.
PHASE 2 - 31 October Deadline –Transfer of inactive low balance accounts to the ATO
This is directed specifically at low balances (under $6,000) that do not have insurance.
If the super fund has not received any contributions or rollovers for at least 16 months, the account may be transferred to the ATO. The deadline for Super funds to achieve this is 31 October 2019.
What is an Inactive Low Balance Account
The Super account must meet ALL of the following criteria before they can be rolled to the ATO by your existing Super fund :
- the account balance is below $6,000,
- no insurance is held in the account,
- the member has not met a prescribed condition of release, and
- the account has been inactive for a continuous period of 16 months
However, an account is excluded from being an inactive low balance account if any of the following have occurred in the last 16 months:
- contributes or rolls over an amount to the fund,
- makes an investment switch,
- changes insurance cover,
- amends or makes a binding death benefit nomination,
- declares to the ATO that they are not a member of an inactive low-account balance or the super fund is owed an amount in respect of the member.
Note Declaration Will be Required Every Year.
If an otherwise impacted member wishes to declare to the ATO that they do not have an inactive low balance account (and avoid their account being transferred to the ATO), they must make this declaration on an ongoing basis (ie at least every 16 months).
What Can you do to avoid transfer to the ATO ?
Your super fund will be contacting you (if they have not already) to provide you with an option to declare your account in NOT inactive and thus can stay put for at least another 16 months if you have no further activity as defined above.
What Happens if You Super is transferred to the ATO ?
The ATO is likely to try and find an alternative Super fund in your name (via matching TFN and personal details) and roll your super to a larger account.