Shorten announces super changes
By WP | 22/10/2012 1:00:00 PM | 14 comments
The government has announced its much-anticipated measures aimed at bringing in that hallowed surplus, so how has the nation’s superannuation system fared?
According to an official statement from Superannuation Minister Bill Shorten, new proposals have been announced in today’s Mid-Year Economic and Fiscal Outlook which will prevent super accounts from being eroded by fees and charges, lower operating costs and improve tax certainty.
Key among the proposals are changes to the way in which lost super will be treated, with Shorten announcing that new proposals in this area are estimated to improve the budget position by $675.2m over the forward estimates period.
Claiming that there is currently around $17bn sitting in 3.4m lost accounts in superannuation funds, Shorten has announced that “new treasury analysis shows the government can do more to prevent small accounts being eroded by fees and charges without a member’s awareness”.
He added that the government will implement the following reforms “to preserve the value of lost member accounts in the superannuation system”:
The account balance threshold below which inactive accounts, and accounts of uncontactable members, are required to be transferred to the ATO will be increased from $200 to $2,000.
Interest will be paid at a rate equivalent to CPI inflation from 1 July 2013 on all lost superannuation accounts reclaimed from the ATO.
The period of inactivity before an account of an unidentifiable member is required to be transferred to the ATO will be reduced from five years to 12 months.
Shorten announced that the reforms to the transfer of lost accounts to the ATO will take effect from 31 December 2012, with the ATO using its data matching resources to match these lost accounts with members.
“The Government will consult further on additional ways to facilitate this process of reuniting members with their lost accounts,” he added.
“Individuals can reclaim superannuation accounts transferred to the ATO at any time, however no form of interest is currently paid when they are reclaimed”.
“The introduction of interest at CPI means that not only will these small lost accounts no longer be eaten up by fees and charges, but they’ll actually retain their value in real terms when they’re re-united with the lost member.”
The reforms will also help to reduce the number of superannuation accounts that have unidentifiable members by reducing the period of time that a super fund can hold the account of an unidentifiable member, claimed Shorten.
He added that this will encourage funds to collect sufficient information to identify members during the period when contributions are being made.
In terms of improving the nation’s bottom line and delivering that surplus, Shorten stated that changes to the way lost super is treated are estimated to improve the budget position by $675.2m over the forward estimates period.
The ATO will receive $62.8m over the forward estimates to implement these changes and will also administer $37m in interest payments associated with reclaimed funds.
Other proposals, as outlined in Shorten’s statement, included:
Bringing the super industry online: Manual processing of superannuation transactions currently cost between $5 to $10 per transaction. It is estimated that after SuperStream is implemented, processing costs will be between 5 to 15 cents per transaction. These savings will flow to members in the form of lower fees and charges.
Reducing the superannuation industry levy: “The Superannuation Supervisory levy will be reduced by $38.2 million over the next six years, commencing with a 10.4% reduction commencing in 2013-14. The reduction in the levy is as a result of savings in the ATO’s administration of SuperStream.
Reforming the SMSF levy: The ATO is responsible for regulating the rapidly growing and diverse SMSF sector and has advised the Government that the levy isn’t fully covering its costs. This means that people who don’t have an SMSF currently have to pay for some of the costs of regulating them, said Shorten. The levy will be increased from $191 to $259 per annum from 2013-14 onwards to ensure SMSFs pay the full cost of regulating their sector.
Greater certainty for superannuation fund mergers: Currently, the tax laws prevent members from manipulating a better tax outcome by choosing to draw down their superannuation benefits from different tax components, said Shorten. It is not appropriate that this integrity rule should apply where the movement of a member’s benefits is due to circumstances outside their control, like the case of merging superannuation funds.
What do you make of these proposals? Place your comments below.
Bob Kelso on 22 Oct 2012 01:46 PM
Better than some scumbag superfund taking 'insurance' premiums and fees out of it until nothing is left...
Ben on 22 Oct 2012 01:55 PM
Are they serious? 12 months before being classed as inactive? What a great way for the government to get a hold of a bunch of cash quickly and use the funds how they see fit whilst only paying a rate of CPI. How on earth does this really help people? It is yet again short sightedness by a government in turmoil.
Matt on 22 Oct 2012 01:59 PM
I thought insurance premiums were only deducted when the member had insurance cover!!!
Malcolm on 22 Oct 2012 02:17 PM
In response to Bob Kelso. I cannot let his scumbag comment go. Superfunds are dammed if they do and dammed if they don't. Dont you think it is up to the individual to look after his own super funds which might have had default insurance on them because the govt told them they had to have insurance. Is it the funds fault if the member changes address and doesn't let the fund know?
Michael O'Hara on 22 Oct 2012 02:18 PM
These changes sound logical and are at least directed at the people most likely to be disadvantaged by the superannuation system.
Interesting choice to pay the full CPI though. Depending upon your view of the world, it potentially makes the option of ignoring your small super accounts even more attractive, as you could be earning at a better rate than generally available in the marketplace (just try to price a full indexed, AAA government guaranteed rate of return on a super fund)...
Stephen Varhegyi on 22 Oct 2012 02:21 PM
No wonder B.S. wouldn't give any undertakings on Q&A. Quite clever when you think about it. At least members will now be compensated when they try to collect their lost super from the ATO. It also helps Labor to balance their budget. Boy they really are scraping the bottom of the barrel aren't they? As for calling super funds scumbags I think you've been watching too much TV. It seems that everyone are scumbags except for TV programing execs and presenters.
Stephen on 22 Oct 2012 02:47 PM
How long are the forward estimates? If it is four years, then what does a $125 million do in the scheme of things. It is about time this government gave up that stupid idea of trying to have a $1.5 billion surplus. The government debt is $259 billion and counting. Besides governments are supposed to go into debt during difficult times so as to keep jobs going through capital works.
The Captain on 22 Oct 2012 03:03 PM
Try reading it this way, instead of "Government" read it as "the rest of us who know where our super is and have been bothered to take an interest" (us). People with lost super will have their fees covered and get guaranteed CPI from "us" because they don't care. A whole system will have to be developed by "us" and paid for by "us" so that those people who let their money sit around in small accounts can't be bothered to do the small amount of work required to round it up and let it grow like it's supposed to.
Garry on 22 Oct 2012 03:18 PM
If there is insurance attached and the ato takes the funds and a client dies will Shorten pay the claim or say sorry bad luck we needed the funds for our surplus, where is the ATO getting $62.8m to run the scheme.
Andy A on 22 Oct 2012 10:46 PM
I am from the goverment I am here to help you? I have always suspected there wil be nothing left of my super as the pollies are desperate to find a way to access the trillion plus dollars in Australian Super. This is just the start from these communist lackeys.
GAC on 23 Oct 2012 08:41 AM
SMSFs are being hit again with an increased levy. According to the calculations above (490,000 SMSFs at $259 levy), it costs the ATO $127,000,000 to administer just this section of the superannuation industry. How is this justified when every SMSF must be independently audited before the return is lodged?
Michael on 23 Oct 2012 09:44 AM
Fairly minor changes really. The only disadvantage of the ATO receiving lost super earlier, is the small impact it may have on the underinsurance problem in this country. As for increasing the SMSF levy it makes perfect sense, and may see some of the smaller ones no longer established.
Jack on 23 Oct 2012 10:20 PM
I just rolled over all my super funds into a SMSF. Except the Governement Super Fund (PSS), which is locked down until retirement. Why are all funds required to make rollover easier, except PSS?