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Are you still insured through your super? 

Published 22 July 2019

Gayle Bryant explains that new rules to tidy up super mean many people have lost their insurance cover.

The government’s ‘Protecting your super’ changes are designed to protect you from paying unnecessary fees and insurance premiums that can erode your super. While this is a positive move, there may be implications that you’re not aware of.

The most significant reform is the switching off of insurance cover in inactive accounts. If you or your employer didn’t make any contributions or rollovers to your super account for 16 months or more and you did not make an election with your super fund to keep your cover, your life insurance would have been cancelled from July 1 – regardless of what your balance was.

The Association of Superannuation Funds of Australia found more than 3 million Australians are likely to have been affected by this change, but only 53 per cent were aware of it.

The association’s chief executive officer Martin Fahy says if you missed the July 1 deadline you should still check your super: “You can opt to reinstate your insurance however it may not be automatic. For example, you may need to complete a medical-history questionnaire or provide other medical information to qualify for the cover.”

Fahy says members will receive up to three notices prior to cancellation in future and people should use them as an opportunity to review their insurance needs.

Rice Warner consultant Nathan Bonarius says members can still contact their fund to try and opt back in if they didn’t take any action before July 1.

“July 1 won’t necessarily be the date that cover switches off for everyone – it depends on when they last made a contribution – so it’s possible you may have more time,” he says. “Some funds might also allow you to automatically reinstate cover without underwriting if you get back to them within a short period of time after the cover was switched off. This will vary by fund so it is best to contact your fund directly.”

The good news if you are a OnePath customer is if you want to reinstate your default, additional or underwritten insurance cover without needing to provide a medical report, you can do so by requesting it in writing before October 1, 2019. After this date, underwriting requirements will apply.

ATO takes charge of inactive low-balance accounts

From July 1 your low-balance inactive superannuation accounts will be brought together.

“If your balance was less than $6000, you did not have insurance and your account was inactive for 16 months or more [at June 30, 2019], then your balance will be transferred to the ATO [Australian Taxation Office] and merged with your active account,” Fahy says. “People with no active accounts will have their balance held by the ATO.”

Within 28 days of receiving your super, the ATO will try and transfer it to an active fund if one exists, and where the transfer will take your total balance to $6000 or more. The aim is to consolidate your inactive super accounts – thus saving you fees. Inactivity for this purpose is defined differently than for insurances so your money may not be consolidated if you have made a binding death nomination for example. You can check to see if you have lost super by logging into your ANZ Internet Banking - follow our three easy steps.

Fee limits and bans

If you have a low-balance super account your fees will be reduced. From July 1, 2019, accounts with $6000 or less pay no more than 3 per cent on yearly fees. This means the total combined amount of administration, investment and indirect fees and costs charged by your fund to your account will be no more than 3 per cent of your account balance. If your account has only $1000 then the maximum amount in total fees your fund can charge you each year is $30. If you pay more than the 3%, your super fund will refund the excess amount within three months of the end of the year.

Also, since July 1, 2019, withdrawal or exit fees on super accounts, including fees for partial withdrawals, have been banned, regardless of your account balance.

Voluntary super contribution rules relaxed

If you are aged 65 to 74, you could only make voluntary contributions to your super account if you worked 40 hours in a 30-day period in a financial year. This is known as the ‘work test’.

From July 1, 2019 you will be exempt from this test if you are aged 65 to 74 with a total super balance at 30 June below $300,000 and you were working the previous financial year. So you can make voluntary (after tax or before-tax) contributions to your chosen super account for 12 months, explains Fahy.

There are a few rules around this:

  • Your total balance in super across all accounts (including those in pension phase) must be below $300,000 at the end of the past financial year.
  • You must have met the work test the previous financial year.
  • The exemption applies for one financial year only, the work test will apply if you want to contribute beyond that.
  • You can only use this exemption once, even if you return to work at a later time.

Further changes to contribution rules

Proposals were put forward as part of the 2019 Federal budget to remove the work test requirement for people who are 65 or 66, and extend the ability to “bring-forward” their after-tax contribution cap to those under age 67. These changes are proposed to help align super contribution rules to the age at which most people will become entitled to an age pension, which is 67. 

Additionally, there is a proposal to allow a person to make an after-tax contribution for their spouse up to the spouse’s 75th birthday, so long as the spouse is working.

Bonarius says the reforms around the age-limit extensions won’t affect huge numbers of people. “Before taking any action you should wait for the legislation to pass and seek financial advice to see if taking advantage of these new rules is right for you,” he says.

SMSF rules may change

Super legislation that was not passed by Parliament before the federal election and has since lapsed could be reintroduced, including ones that affect self-managed super funds. Two in particular are:

  • reforms to increase the maximum number of SMSF members from four to six
  • legislation around simplifying the calculation of exempt income for SMSFs that have both pension and accumulation accounts in a financial year.

“It’s possible these reforms will pass if they are put to Parliament again as the Senate has changed quite a bit post-election,” Bonarius says.

“However, the current average number of members in an SMSF is closer to two so it’s likely this new rule won’t be utilised by most people, while the changes to exempt income calculations will have small cost savings for some SMSFs.”


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