The rules, they are a-changin’! If you have a super account, read here. If you don’t have a super account, pass this on to someone who does.
What’s going on?
The government has spoken: from 1 July 2019, certain changes will affect your superannuation account. Your super fund should have contacted you about these changes, but you probably didn’t read their email, did you? Yup, we feel you.
Why is super changing?
Basically, the changes protect super accounts with low balances from being eroded by insurance premiums and fees. Sounds great, and it is – except that if you’re running your own business, working a contract role, working overseas or taking a break from work, it could cause you some hassles if you haven’t interacted with or contributed to your super fund in the last 16 months.
Okay, so how is super changing?
Super is changing in three main ways.
Your super insurance might automatically be cancelled
Most of us have insurance for death, total and permanent disability through our super accounts. If you have a super account you haven’t put money into for at least 16 months, your insurance will be cancelled.
As Australian Super Fund Association strategy and experience general manager Katrina Horrobin told ABC News, this "will affect you regardless of what your age is, what your account balance is, regardless of whether you've interacted with the fund in the last 16 months, or deliberately chosen to have your insurance: it will still affect you."
Why worry about this? Well, if you rely on the insurance from your super to cover your back, and don’t realise that it might be cancelled, it could leave you in serious trouble when something bad does happen, and you want to put in a claim. So make sure to check with your fund ASAP to determine the status of your super and insurance. Ask them:
- Whether you’re affected
- If the level of your insurance cover is right for your personal circumstances
- If you have multiple super accounts, decide if you want to consolidate them
Find more information at this website, set up by the Financial Services Council and ASFA
Exit fees will now be banned
Well, whoop-de-doo! This means you won’t be hit by a random $50 charge when you decide to switch super funds. It’s about time, we say!
And another thing: if you only have a small amount of super – less than $6 000 – fees will be capped at 3 per cent to avoid your tiny balance from being eroded even further. Why, thank you so much, government people!
Inactive accounts may be transferred to the ATO
If you've got an inactive account with a low balance (which means you haven't contributed to your account or engaged with your fund in the past 16 months and it has a balance of less than $6 000), your super might be automatically transferred to the tax office.
Now, when we read that we were, like, “hold up!”, but it looks like they won’t actually use your super – they’ll just try to combine your inactive accounts with the main account you’re using (if you have more than one super account).
If they can’t find an active super account, they’ll hold the balance until it can be claimed. You don’t want that, because your money won’t be earning market return while it’s sitting with the ATO, says Horrobin. "A balanced super fund could expect to earn 7/8/9 per cent per annum, something of that magnitude. If it's sitting at the ATO it will be earning a very, very low interest rate — that's not good for your end retirement outcomes."
So what do I do now?
Contact your super fund ASAP! Then:
- Make sure all your personal details are up to date with your chosen fund
- Consolidate your super accounts if you have more than one (if you want to – you may have reasons for having separate accounts) – get more info here.
- While you’re at it, triple check to make sure that your employer is contributing at least 9.5 per cent to your super!
Moral of the story? Keep your mind on your money, people! No one else is gonna do it for you!
Main image: Pexels.
All Gifs via Giphy.