Handling lost and inactive super accounts over to the Tax Office will be good for their owners, Treasury has told a Senate committee. It the accounts stay with the super funds the fees and charges taken out will “typically exceed the likely earnings” pushing them backwards.
Treasury retirement incomes specialist Paul Tilley told the inquiry that under the changes due to start in January the Tax Office would pay interest on the inactive accounts it sequestered at the rate of the consumer price index, which is usually around 2.5 per cent. If they stayed with the the funds they would face “erosion”.
From January unidentified balances of up to $2000 will be transferred to Tax Office after one year without contributions. The previous limit was $200 and it had to stay untouched for five years.
While the change will improve the government’s short-term budget position, accounting for around one third of this year’s forecast $1.5 billion surplus, Mr Tilley said it made sense from the point of the account holders.
“A 30 year old facing typical account fees and earnings would be $1000 better off over five years,” he told the committee...
Representatives from the Institute of Superannuation Trustees, the Financial Services Council and the Association of Superannuation Funds all said they supported the legislation.
The Australian Bankers Association objected to the timing of a separate measure that would transfer unidentified and inactive bank deposits to the Securities and Investments Commission after three rather than seven years. Chief executive Steven Munchenberg said the banks would have to wait until the new year to adjust their computer systems in order to avoid disruptions in the leadup to Christmas.
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