Now that we've rolled into the new financial year, the 1st July also marks some changes to most superannuation funds. We've detailed the most important changes below, and most of these changes revolve around the new "Protecting Your Super" laws. These laws include several measures designed to ensure that super account balances are not being unnecessarily eroded by fees and insurance premiums, particularly for accounts that have a low balance or have been inactive for a certain period.
So, how does the new legislation work?
1. Inactive, Low-Balance Accounts
Under the Government's "Protecting Your Super" package, if you have a super account that has been inactive for 16 months with a balance of less than $6000, it will be transferred to the ATO. Workers often end up with multiple inactive super accounts when they open a new account with a new employer but neglect to transfer funds from their old one. If you have ever changed your name, address, job or lived overseas, you may have unintentionally lost track of some of your super. Following the transfer, the ATO will keep your money safe and you will pay no fees. Within 28 days of receiving your money, the ATO will try to transfer the cash into your active super fund, if you have one, and where the transfer would take your balance to $6000 or more.
2. Check Your Super
If you have linked your MyGov account to the ATO, you will be able to see all your super accounts – including any you may have forgotten – in the one place. There, you will also have an ability to consolidate all your funds into your preferred main account, with the click of a button. The process can be completed entirely on the MyGov site, although some follow-up paperwork may be required by some funds.
3. Banning of Exit Fees
Not only can you consolidate funds or switch from one super fund to another more easily, you won't have to pay an exit fee from your current fund. For example, there will be no penalty if you choose to move from a non-performing fund to one of the top investment performers.
4. Removal of Insurance Cover
If your super account was declared inactive, your death and total and permanent disability insurance cover attached to it may have been canceled, to prevent further erosion of funds. Super funds have been busy in the past few months informing fund members via email and the post that their insurance would not continue unless they choose to "opt in" for coverage. If your cover has been canceled but you wanted to keep it, you will now need to re-apply through the insurer's standard application and assessment process. This may require you to provided medical evidence and history to the insurer. We are not in favour of this new legislation as we feel many people will unknowingly lose their insurance cover, which is vital in the event of a claim.
5. Catch-up Contributions
Perhaps the most exciting change is the introduction of the catch-up contributions rule, which the Coalition was able to bring in after winning government. You can now boost your retirement nest egg by utilising unused concessional contributions cap amounts from previous years.To qualify to make catch-up contributions, you must have less than $500,000 invested in your super account as of June 30. You also must not have used your entire $25,000 annual concessional contributions cap in the previous financial year. You can carry forward up to five years of unused concessional contributions caps for use in a later financial year. The five-year carry forward period started on July 1, 2018, meaning that the 2019-2020 financial year is the first in which you can make catch-up contributions. The rolled forward amounts expire after five years.
If you'd like more information on how any of these changes may impact you, please remember we're only a phone call or email away.