New superannuation rules have come into force to protect super accounts from unnecessary fees, so it’s important to see if the changes affect you.
The new laws came into effect in Australia on July 1 this year, primarily to prevent insurance premiums and fees from eroding super accounts with low balances.
The changes come as more than a third of Australians with superannuation are said to have multiple super fund accounts, according to the Australian Taxation Office (ATO).
While the changes are a positive step forward for Australians, they also have some significant consequences for dormant accounts.
Here’s a run-down of what the changes mean and what you can do:
What the superannuation changes mean
The new rules include important reforms to insurance, exit fees and inactive accounts that will impact consumers.
Most people have default insurance through our super accounts, covering death, total and permanent disability, and sometimes income protection.
But your insurance might have been automatically cancelled if your superannuation account has been inactive for the 16 months until July 2019.
The new rules have also made it cheaper to switch to a new super fund by banning exit fees, as well as capping fees at 3 per cent for accounts with less than $6,000 in super.
Another significant reform will see accounts that haven’t had a contribution or haven’t been engaged within the 16 months to July 2019 automatically transferred to the ATO to prevent super fees from eating into balances.
Once transferred, the ATO will hold onto the super balance until it can track down the owner’s active super account and combine them, or it is claimed by the owner.
While super balances will be safe from needless premiums under the ATO’s stewardship, they will earn a very low interest rate compared to an average super fund.
What can you do?
The changes could disadvantage a range of people who aren’t receiving regular super contributions, including people taking a break from employment or working in a contract role.
Other groups include people running their own business or working overseas. But there are some simple steps that consumers can follow to stay on top of their super:
- Contact your super fund and check if you’ve been affected by the changes
- Review your level of insurance to make sure it is suitable
- Consider consolidating multiple super funds.
Need help navigating your superannuation?
The new superannuation rules have been designed to help the general public manage their super better, however some people may lose out if they don’t keep an eye on their accounts.
If you need superannuation advice or want to optimise your super so you can retire with peace of mind, LDB has trusted advisers who specialise in superannuation and wealth management.
To learn more, give us a call on (03) 9875 2900 or fill in the form below and an LDB expert will get in touch to help you with your superannuation needs.
