ASFA has warned that the Government’s draft legislation to increase the account balance threshold above which lost superannuation accounts must be transferred to the Tax Office may leave some account holders without insurance cover. Currently, lost and inactive superannuation accounts with balances of less than $2,000 must be transferred to the Commissioner. The Exposure Draft – Tax and Superannuation Laws Amendment (2014 Measures No 2) Bill 2014 is proposing to increase the account balance threshold to $4,000 on 31 December 2015 (and $6,000 from 31 December 2016): see 2013 LTN 243 [8].
While the protection of lost superannuation may be appropriate for account balances under $2,000, ASFA considers there is less certainty about the need for such protection of the members’ accounts up to the higher thresholds. In its submission on the draft legislation, ASFA says that members with account balances greater than $2,000 would be significantly better off where the account balance remained invested with a regulated fund. ASFA also noted that concerns were raised about the immediate loss of life and total and permanent disability (TPD) insurance cover for affected account holders when the threshold was initially increased to $2,000 (from $200). Although not all lost super accounts transferred to the Tax Office would have insurance cover, ASFA says a significant number would and the potential impact could be significant if a lost member experiences a claimable event.
[LTN 23, 5/2/14]