If Australians don’t have their super consolidated by the end of October, it could be transferred to the Australian Tax Office (ATO), risking loss of future earnings. Read on to find out more and what you need to do to avoid being affected.
Who is affected?
On October 31, all inactive, low-balance superannuation accounts with a balance of less than $6,000 will be rolled over to the ATO, in attempt to stop Australians with multiple accounts being charged unnecessary fees and charges.
It’s a positive move, as it’s expected to save Australians $2.6 billion in fees eating into their nest eggs. However, if the ATO is unable to connect the owners to these accounts, the owners risk loss of future earnings.
The changes only affect accounts that have a low balance and haven’t received a contribution within the last 16 months. Therefore new parents, or those working or studying overseas, are groups most likely to be impacted by the move.
Why is this important?
If the ATO is unable to match the owners to their accounts, the ATO will hold onto the accounts. They will earn interest benchmarked with the Consumer Price Index (CPI), which is 1.6 percent. However, that’s 4.5 per cent lower than the industry super funds’ average returns, meaning you will be earning less than you otherwise could be.
It’s therefore important you take a few minutes to see if you have any super funds that you’re not aware of and get your super consolidated in the one place. In addition to avoiding loss of potential earnings, you’ll also benefit from compounding returns and avoid paying multiple sets of fees.
What do I need to do?
If you know you have a super account with less than $6,000 and haven’t made a contribution within the last 16 months, call your super fund and they’ll be able to help you.
If you’re not aware of all your super accounts, run a check for lost super. It is as easy as logging into your MyGov account. With a few clicks, you can see if you have any lost superannuation and consolidate it instantly. Just make sure that you’re not losing any insurance benefits before consolidating and closing accounts.
By having your superannuation all in one account, you pay less fees and your investment can grow faster. While you’re checking for lost super, also have a look at these 6 hacks to boost your super. The sooner you make changes, the larger the effect it will have on your tax and superannuation balance next financial year.