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Protecting your super changes

The Federal Government’s Protecting Your Super package which comes into effect on 1 July 2019 contains a range of changes designed to protect low balance super accounts.

These changes include:

  1. An annual cap on fees and costs of 3% applies to superannuation accounts with balances under $6,000;
  2. Exit fees will be removed;
  3. Accounts that are inactive for 16 months will have any insurance on that account cancelled, unless the member advises the Fund in writing beforehand to retain the insurance cover;
  4. Accounts under $6,000 that are inactive for 16 months will be automatically transferred to the Australian Taxation Office (ATO).

Further detail on these rules are set out below.

From 1 July 2019, super accounts with a balance of $6,000 or less will have a 3% annual cap applied to their fees and costs. This cap does not apply to Retirement Income or Transition to Retirement accounts.

The 3% annual cap will cover:

  • Indirect investment fee;
  • Indirect administration fee;
  • Fixed administration fee;
  • Indirect cost ratio.  

More information about Club Super’s current fees and costs is available in the Product Disclosure Statement and Additional Information documents.

Application of the cap for full year members
From 1 July 2019, super accounts with a balance of $6,000 or less will have a 3% annual cap applied to their fees and costs. Any excess amount above 3% will be refunded to the account within 3 months.

Example
Brett has been a member for all of 2019/20 and has an account balance of $3,300 at 30 June 2020. The cap on fees and costs would be 3% of $3,300 = $99. If the Fund had charged Brett total fees and costs of $130 in 2019/20, then an amount of $31 would need to be refunded to Brett’s account by 30 September 2020. 

Application of the cap for members who join the Fund part way through the year
From 1 July 2019, for members who join the Fund part way through the year, if their account balance is $6,000 or less at 30 June, the annual cap on fees and costs of 3% will be pro-rated based on their period of membership.

Example
Amanda joined the Fund on 1 October 2019 and has an account balance of $2,100 at 30 June 2020. The cap on fees and costs would be 3% of $2,100 * 273/365 = $47.12. If the Fund had charged Amanda total fees and costs of $60 in 2019/20, then an amount of $12.88 would need to be refunded to Amanda’s account by 30 September 2020.

Application of the cap for members who exit the Fund part way through the year
From 1 July 2019, for members who leave the Fund part way through the year, if their account balance is $6,000 or less at the date of exit, the annual cap on fees and costs of 3% will be pro-rated based on their period of membership.

Example
Sally exited the Fund on 1 October 2019 and has an account balance of $5,000 at that time. The cap on fees and costs would be 3% of $5,000 * 92/365 = $37.80. If the Fund had charged Amanda fees and costs of $52 in 2019/20, then an amount of $14.20 would need to be refunded to Amanda’s account, and will be paid out as part of her benefit payment.

The cap will apply to individual accounts in each Fund. For example, a member may have two or more accounts in a Fund, one of $3,000 and the other of $11,000. Although the total of the two accounts is over $6,000, the cap will apply to the $3,000 account.

From 1 July 2019, super funds will no longer be able to charge exit fees. Up until 30 June 2019, Club Super charged an exit fee of $55. From 1 July 2019, this will be reduced to nil.

From 1 July 2019, accounts that are classified as inactive for a period of 16 months will have any insurance cover cancelled at that time, unless the member has advised Club Super in writing beforehand that they wish to keep their insurance cover. An account is considered inactive if the account has not received any contributions or rollovers in the last 16 months, regardless of the account balance.

It should be noted that the inactivity period is retrospective. This means that if the account reaches 16 months of inactivity on (say) 12 August 2019, insurance will cease at that time, unless the member has provided written advice to Club Super before then that they wish to retain the insurance.

Notification to members

Club Super will issue the following notifications to members:

  • by 1 May 2019, Club Super will write to members whose account has at least 7 months of inactivity, advising them that if their account reaches 16 months of inactivity on or after 1 July 2019, their insurance will cease at that time, unless they advise Club Super in writing beforehand that they wish to retain their insurance cover;
  • after 1 July 2019, for members with inactive accounts who have not advised that they wish to retain their insurance cover, Club Super will issue notification within 2 weeks of their account reaching 9, 12 and 15 months of inactivity advising them that if their account reaches 16 months of inactivity, their insurance will cease at that time, unless they advise Club Super in writing beforehand that they wish to retain their insurance cover;
  • if a member with an inactive account advises the Fund in writing that they wish to retain their insurance, Club Super will write to the member within 2 weeks (and at least every 15 months thereafter), acknowledging their advice to retain their insurance, and advising that the member may elect to cancel their insurance, and how they can do that.

From 1 July 2019, accounts under $6,000 that are classified as inactive for a period of 16 months will be automatically transferred to the Australian Taxation Office (ATO), unless:

  • the member has advised Club Super that they wish to retain their insurance within the Fund; or
  • the member has satisfied a relevant condition of release.

For the purposes of paying these amounts to the ATO, an account is classified as being inactive if the account has not received any contributions or rollovers in the last 16 months. However, (and in contrast to the insurance rules outlined at 3 above), an account will not be classified as inactive if any of the following occurred in the last 16 months in Club Super:

  • the member has changed their investment options;
  • the member made changes to their insurance cover;
  • the member made or amended a binding nomination of beneficiary;
  • the member advised the ATO that their account is not an inactive low balance account;
  • Club Super was owed an amount in respect of the member.

Twice a year, Club Super will be required to identify which accounts under $6,000 meet the definition of being inactive. Specifically, Club Super will be required to:

  • identify at 30 June which accounts under $6,000 meet the definition of being inactive. The Fund must then report and pay such amounts to the ATO by 31 October. The first cycle will relate to the period ending 30 June 2019, with reporting and payment to be made to the ATO by 31 October 2019;
  • identify at 31 December which accounts under $6,000 meet the definition of being inactive. The Fund must then report and pay such amounts to the ATO by 30 April.

ATO consolidation of amounts into member accounts
Once the ATO receives low balance inactive accounts, they will aim to identify and pay the amounts within 28 days to applicable members’ active superannuation accounts with a balance above $6,000. This process will help to reduce the number of members’ who hold multiple small accounts and who may be paying fees and costs in multiple Funds.