Super protection Bill – ‘exit fee’ prohibition; sub$6k small accounts: 3% fee cap, ‘opt-in’ insurance (under 25’s & ‘inactive’), transfer ‘inactive’ accounts to Commissioner; transfer ‘inactive’ to ‘active’ accounts

On 21 June 2018, the Minister for Revenue and Financial Services, Kelly O’Dwyer, introduced the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 into the House of Representatives, which it passed on 28 June 2018.

Also, on 21 June 2018, the Senate referred the provisions of this Bill to its Economics Legislation Committee for inquiry and report by 13 August 2018, with submissions due by 23 July 2018. On 13 August 2018, the Committee did report, recommending that the Bill be passed (see related Tax Technical Article).

The measures include:

1. 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.
2. EXIT FEES – banned for all super accounts, regardless of the balance.
3. 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.
4. 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.

The Bill proposes to amend:

• the Superannuation Industry (Supervision) Act 1993 – s99BA – preventing ‘exit fees’; s99G providing a ‘fee cap’ on low balances; s68AAA – s68AAE, providing for ‘opt-in’ only insurance cover in various circumstances;
• the Superannuation (Unclaimed Money and Lost Members) Act 1999 – including: s20Q – s20QM (transfer of inactive low-balance accounts to the Commissioner); s24N – s24NB (reunification of superannuation balances).
• the Income Tax Assessment Act 1997, and the
• The Taxation Administration Act 1953

DATE OF EFFECT: 1 July 2019. The initial transfer of inactive low-balance accounts to the ATO will take place during the 2019-20 financial year which will also be when the ATO begins to proactively reunite monies currently held.

COMMITTEE REFERRAL: The Bill has already been referred to the Senate Economics Legislation Committee for inquiry and report by 13 August 2018. The Selection of Bills Committee said that a number of stakeholders across the super and insurance sectors, including retail and industry funds, had already expressed “significant concerns about the Bill”.

FJM 25.6.18

[APH website: Bill Tracker, Bill, EM; Minister’s website: Media Release; LTN 117, 21/6/18; KPMG, 21/6/18; Tax Month – June 2018]

Study questions (answers available)

1. Would the 3% fees cap be on all superannuation accounts?
2. Would the ban on ‘exit fees’ be on all superannuation accounts?
3. Would the ‘opt-in’ insurance requirement apply to all superannuation accounts?
4. Would the requirement to transfer sub-$6k, 13 month inactive accounts, to the Commissioner, otherwise apply to all superannuation accounts?
5. Would the Commissioner get the power to pro-actively consolidate inactive accounts, into an active account, without needing the consent of the member?