1 July 2019 Retail and Industry Fund Insurance Changes
From 1 July 2019, the Protecting Your Super reforms will commence. It’s important to understand how these changes will impact you – particularly where you have a super fund being maintained for insurance purposes only.
Superannuation reforms announced in February will commence from 1 July 2019. In summary the measures include:
- Insurance will no longer be permitted to be provided to members with inactive MySuper or choice accounts unless the member has made an election to retain insurance cover. An account will be considered inactive if no contributions or rollovers have been received for a continuous period of 16 months. Important: This may impact clients where a super fund has been retained for insurance purposes only and regular contributions/rollovers are not being received by the fund.
- Superannuation accounts with balances below $6,000 (that do not hold insurance) will be required to be transferred to the Australian Taxation Office (ATO) if an account has been inactive for a continuous period of 16 months. Some exceptions apply.
- The ATO will be required to pay amounts they hold into a member’s active superannuation account, where the reunited account balance would be greater than $6,000.
- Administration and investments fees (and associated costs) will be capped to three per cent if the balance is below $6,000 on the last day of the fund’s income year.
- A ban on exit fees.
Communications of Insurance Arrangements
On 1 April 2019 Industry and Retail SuperFund were required to identify member’s accounts that had been inactive for the previous six months. On or before 1 May 2019, trustees must give identified members written notice that:
- From 1 July 2019, the fund will not provide the member with insurance cover if the account remains inactive for a continuous period of 16 months.
- Cover can be maintained if the member elects to do so.
- Sets out a method for electing to opt-in to obtain or maintain insurance.
It is important to note that retail and industry superfund will be required to take action on 1 July 2019 for any inactive/low balance accounts without elections.
If you are concerned you are going to be affected by these changes or need assistance with your insurance, please feel free to give us a call.