New legislation was passed in 2019 introducing a number of initiatives to cap fees and prevent unnecessary insurance premiums from eroding the account balances of super fund members who have ' inactive' low-balance superannuation accounts.
Young people and low income earners can sometimes get a rough deal out of superannuation. Their low account balance means that they pay higher than normal fees, and because many people in this situation earn lower incomes, they sometimes pay higher tax on their superannuation than they do on their regular wages.
To address this, new laws were introduced in 2019 as part of the 'Protecting Your Super' package of reforms. The core provisions are:
|Capping fees at 3% may seem unnecessary as very few super funds charge percentage fees anywhere near that high. However, the fee cap was introduced to protect young people and low income earners who are disproportionately impacted by, say, high membership fees. For example, if a member pays $100 in member fees on a $1000 account balance, this converts to 10% - more than triple the cap.
The new law comes into play if the account balance is less than $6000, but only members with less than $3000 in their account are likely to be impacted. If you do pay more than 3% in fees, your super fund will refund this money to you at the end of each financial year.
|Reducing insurance premiums on inactive accounts|
|In response to concerns that there are thousands of fund members with inactive superannuation accounts who are still paying hundreds of dollars in compulsory insurance premiums, the new law requires funds to identify low-balance inactive accounts and transfer them to the Australian Taxation Office.|
|GET ACTIVE, GET RE-INSURED
If you're an inactive super fund member you might have received a letter from your super fund asking if you want to continue being insured. If you didn't respond, your fund most likely switched off your insurance. If you want the insurance to re-commence you need to contact your fund immediately.
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