The Senate Economics Legislation Committee has released its report into the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 and recommended that the Bill be passed.
The measures include:
- SUPER FEES – capped at 3% per year for administration fees, investment fees and “prescribed costs” charged on super accounts with balances less than $6,000.
- EXIT FEES – banned for all super accounts, regardless of the balance.
- INSURANCE OPT-IN RULE – super funds to provide insurance on an “opt-in basis” for new members under age 25, members with account balances below $6,000, and for accounts that have not received a contribution for 13 months, unless a member has directed otherwise.
- INACTIVE LOW-BALANCE ACCOUNTS – balances less than $6,000 will be transferred to the ATO if they have been inactive for 13 months (including the period before the measure commences). However, this requirement will not apply to members who have satisfied a condition of release, accounts with insurance, SMSFs and defined benefit interests. The ATO will also be given greater powers to proactively consolidate amounts held for a person who has an active account with a super fund, without needing to be directed to do so by the person. An account will not be considered inactive if it receives superannuation guarantee payment from an employer or another type of concessional contribution, a personal after-tax contribution, non-concessional contribution, rollover or a co-contribution.
[See the Tax Technical Article about this Bill.]
The Senate Committee (including Labor Senators) recommended passing the Bill [para 2.167, p47] and commented that the measures in the Bill are an important first step in addressing the extensive proliferation of superannuation accounts and serious erosion of members’ balances through excessive fees and inappropriate insurance arrangements. This was despite noting the following:
- Capping fees moved the burden of paying fund costs onto other members;
- The cost and time to for funds to change their life insurance arrangements;
- The probable rise in premium cost on remaining members, after significantly fewer in the new ‘opt-in’ cohort did take the group insurance (dismissed as evidence of a level of ‘cross-subsidy’);
- The loss of default insurance cover for affected members.
Despite supporting the Committee’s recommendation to pass the Bill, Labor senators noted that the Government should have awaited the final findings from the Productivity Commission and the Royal Commission regarding superannuation and insurance arrangements, before proceeding with the Bill.
Comprehension questions (answers available)
- Did the Committee recommend passing the Bill?
- Was this to preserve the value of account balances, most vulnerable to costs (viz: low balance accounts);
- Are the proposed ‘opt-in’ insurance proposals, only for ‘low value’ (sub-$6,000) accounts?
- Did the Labor Senators oppose the Committee’s recommendation?