As of 31 December 2016, the Australian government is set to take control of an estimated 100,000 “lost super” accounts and pocket the unclaimed money. It could also inadvertently result in thousands of Australians unknowingly having their life insurance policy cancelled.
What is “Lost Super”?
Your superannuation will be considered “lost super” if your superannuation fund reports you as a lost member. According to the ATO website, the super fund will report your account to the ATO as a lost member account if they have been unable to contact you or have not received any contributions from you for over five years.
Money held in lost member accounts is retained by the superfund, unless it is deemed to be a “small lost member account”. From 31 December 2016, a lost member account is taken to be a ‘small lost member account’ if the balance of the account is less than $6,000 (up from $4000). Small lost member accounts will have their balance transferred to the ATO, until it is claimed back by the lost member.
Implications of Your Super Being Transferred to the ATO
Jim Minto, Interim CEO of The Association of Superannuation Funds of Australia (ASFA) has said that there is nearly $12 billion sitting in lost superannuation accounts, and the aggregate amount of superannuation held by the ATO increased by around $470 million in 2015-2016. He said most of this increase was a result of an increase in the threshold for compulsorily transferring lost super accounts from $2000 to $4000 that came into effect on 31 December 2015, where more than 130,000 accounts were transferred to the ATO.
ASFA has called for the threshold levels to be revisited. Mr Minto said “ASFA has been concerned that increasing the threshold will deprive many Australians of valuable insurance benefits, without their permission. The compulsory removal ‘in effect’ of these insurance benefits creates a large risk for the government and taxpayers.”
“Industry estimates indicate that around 50% of inactive accounts in both the $2,000 to $4,000 and $4,000 to $6,000 balance ranges have insurance cover.”
ASFA is also concerned about the investment earnings for the owners of the lost super accounts, where it is likely that the super funds will generate better earnings than with the ATO (where the balance will be indexed to inflation). While the Australian Government’s view is they are protecting small accounts from fee erosion until the money is reunited with the rightful owner.
How Do I Find My Lost Super?
The Australian Taxation Office (ATO) has established a ‘lost members register’ which records details of superannuation accounts of “lost members” and for certain people whose contribution payments have ceased.
You can track down or check whether you have lost super on the Australian government mygov website. You will need to create an account if you do not already have one.
Avoid Having A Lost Super Account By Consolidating Your Superannuation
Consolidating your super accounts makes sense on a number of fronts :
- Avoid losing track of your superannuation accounts (and risk it being deemed “lost super”)
- Minimise the amount of fees you pay superannuation fund managers
- Avoid paying for multiple life, TPD, or income protection policies across each super account.
The Australian government mygov website allows you to keep track of your super online. You will need to create an account if you do not already have one.
Lost super is not the only unclaimed money that the Australian government is sitting on. The Federal and State governments have more than $1billion in unclaimed money from inactive bank accounts, unclaimed dividends, uncashed cheques and much more.
Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way. We may receive referral commissions from companies referred in this article.