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  • Inactive low-balance accounts

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    The law

    You will find the provisions governing the reporting and payment to the ATO of inactive low-balance accounts (ILBA) in Part 3B of the Superannuation (Unclaimed Money and Lost Member) Act 1999 (SUMLMA).

    Section 20QA of the SUMLMA provides the definition of an ILBA as an account that meets all of the following criteria:

    • No amount has been received for 16 months.
    • The account balance is less than $6,000.
    • The account is not a defined benefit account.
    • The member has not met a prescribed condition of release.
    • Insurance is not being provided in the account.
    • The fund is not an SMSF or small Australian Prudential Regulation Authority (APRA) fund.

    However, an account in a fund that is a regulated superannuation fund will not be an ILBA if any of the following events occurred in the last 16 months in respect of that account:

    Providers must report and pay to the ATO the balance of an account in respect of a person if all of the following apply:

    • An account is an ILBA as at the end of an unclaimed money day.
    • The account is held by the provider on behalf of the person.
    • The account is still an ILBA at the time immediately before the earlier of the time  
      • the payment is made
      • at which the payment is due and payable.
       

    If a payment must be made, the amount is due and payable at the end of the scheduled statement day for the unclaimed money day.

    Identification of inactive low-balance accounts

    You are required to identify accounts that an ILBA relates to in whole or in part. In determining whether an account meets the definition of an ILBA, the tests listed above need to be applied.

    We consider that the tests require consideration at the product level within an account. That is, the tests apply at a product level and not at an aggregated account level that incorporates multiple products. A product for this purpose is a My Super product or choice product as defined in the Superannuation Industry (Supervision Act) 1993.

    Due to the additional complexity caused by implementing this, we are adopting a practical compliance approach. We will not apply compliance resources to review whether funds have applied the relevant tests at a product level to identify their ILBA.


    Received an amount in respect of a member

    Whether you have received an amount in respect of a member depends on the type of payment.

    An amount that could be received in respect of a member, so that the member's account is not inactive, includes:

    • a superannuation guarantee payment from an employer or another type of concessional contribution
    • a personal after-tax contribution or other non-concessional contribution
    • a downsizer contribution
    • an amount rolled over from another superannuation provider or the ATO
    • a government contribution amount.

    Example: Received an amount in respect of the member

    On 1 April 2019, Fund ABC received a rollover amount of $3,400 on behalf of Kellie, a new member.

    Fund ABC is considered to have received an amount in respect of Kellie for crediting to a product within her account on that date. That is, the 16-month period will start from the date that the fund received the amount.

    Therefore the earliest date at which Kellie's account could be identified as an ILBA is the next unclaimed money day after 1 August 2020, which is 31 December 2020. This will only occur if all of the ILBA criteria are met.

    End of example

    Example: Not received an amount in respect of the member

    Steven has two super accounts with the same fund.

    Account 1 has a balance of $1,300 and Account 2 has a balance of $3,600.

    Both accounts have been inactive since January 2018. In June 2019, Steven contacts his fund requesting that his accounts be consolidated within the fund. On 30 June 2019, an intra fund rollover occurs and the balance of Account 2 is transferred to Account 1.

    Following the intra-fund rollover, Steven has one account with a balance of $4,900.

    The consolidation of Steven's accounts within the same fund does not result in the superannuation provider receiving an amount in respect of the member for crediting to a product.

    Steven's account meets all the criteria of an ILBA. The fund is required to identify his account as an ILBA as at the first unclaimed money day, and to report and pay this account to the ATO on the first scheduled statement day.

    End of example

    Changed investment options

    The member has taken positive action that has resulted in a change to the member's investment options. Therefore, the account will not be an ILBA.

    Example: Changed investment options

    Janelle has an account with Ace Super (a regulated super fund). At 30 June 2019, her account balance is $3,970.

    Janelle had previously elected to have the funds in her account invested in Ace Super’s fixed interest option.

    On 4 March 2019, Janelle advised Ace Super that she wanted to switch to the Australian Shares investment option. A change to Janelle’s investment option occurred on 8 March 2019.

    As Janelle undertook a positive action and changed her investment option, Ace Super is not required to report and pay Janelle’s account to the ATO as an ILBA.

    End of example

    Changes to insurance

    An account will not be an ILBA if the member made changes to their insurance coverage (that is, the member would have to take a positive action that has resulted in a change to the insurance coverage under the fund).

    Best practice – guidance

    A change could include a cancellation of insurance but would not include a request to change that was declined or otherwise not actioned. We consider that the cancellation of insurance due to your member not opting in for insurance would not satisfy the provision.

    An insurance claim is also not a change in insurance coverage.

    Example: No change to member's insurance coverage

    Matthew has a super account with A1 Super that, at 30 June 2019, meets all the criteria of an ILBA.

    Matthew is 52 years old and has recently started work as a labourer in the construction industry. Due to the nature of his work he has decided to apply for disability insurance cover through A1 Super.

    An application for this insurance cover was made on 15 March 2019. Due to Matthew's age and occupation, the insurer will not offer the level of cover he was seeking. Matthew's application is declined and he does not pursue the matter further.

    Although Matthew has taken positive action by making an application for insurance cover, because his application was declined there has been no change to his insurance.

    A1 Super is required to report and pay Matthew's account to the ATO as an ILBA.

    End of example

    Example: No change to member's insurance coverage

    Tina receives a letter from her fund advising that her disability insurance cover will lapse on 31 March 2019 unless she notifies the fund, before that date, of her intention to continue this cover.

    Tina does not respond to the letter received from her fund so her insurance cover lapses.

    The cancellation of Tina's disability insurance is not considered to be a change to the member's insurance coverage because she did not opt in and has not taken positive action to cause the change.

    As at 30 June 2019, Tina's account satisfies all of the criteria of an ILBA. Her fund is required to report and pay this account to the ATO as an ILBA.

    End of example

    Binding beneficiary nominations

    An account will not be an ILBA if the member has made or amended a binding beneficiary nomination. It is a matter of fact as to whether a beneficiary nomination is binding on the trustee of a regulated superannuation fund. Where the trustee can exercise discretion in terms of the nomination, the nomination will not be a binding beneficiary nomination under this provision.

    We consider binding beneficiary nominations made consistently with subsection 59(1A) of the SISA and regulation 6.17A of the SISR are binding beneficiary nominations for the purposes of determining inactive low-balance accounts.

    If the nomination is not valid, it is not a binding beneficiary nomination for the purposes of determining if an account is an ILBA.

    Example: Changed a binding beneficiary nomination

    Angela has an account with GP Super (a regulated super fund). At 30 June 2019, her account balance is $2,165.

    Angela had previously given the trustee of GP Super a binding beneficiary nomination instructing the trustee to pay benefits to her son Ryan in the event of her death.

    Since making the original binding beneficiary nomination, Angela has had a second child, Phoebe.

    On 1 December 2018, Angela makes a further binding beneficiary nomination instructing the trustee to also include Phoebe as a death benefit beneficiary. As Ryan and Phoebe are both dependent children of Angela, the trustee must accept her nomination as a binding beneficiary nomination.

    When assessing her account at 30 June 2019, the trustee will recognise that Angela has amended a binding beneficiary nomination within the past 16 months.

    GP Super is not required to report and pay Angela’s account to the ATO as an ILBA.

    End of example

    Member declaration – opting out

    A super account is taken not to be an ILBA if the member, by written notice given to the ATO, declared that they are not a member of ILBA. The written notice is valid for 16 months.

    Example: Opting out

    Jane has a super account with a balance of $4,500 on 30 June 2019 that has received no contributions in 18 months. Jane wants to keep this account, so to ensure it is not transferred to the ATO as an ILBA, Jane completes the Inactive low-balance accounts – Authorising your fund to provide a written declaration to the ATO form and sends it to her fund on 28 August 2019.

    Jane's fund then provides written notice of the declaration to the ATO on 31 August 2019. Jane's account is not considered an ILBA and that status will remain in place until 31 December 2020.

    If Jane’s account meets the criteria of being an ILBA on 30 June 2021 and she doesn't provide another written declaration, her fund will report and pay this account to the ATO on 31 October 2021 statement date.

    End of example

    See also:

    Owed an amount in respect of the member

    Employer superannuation contributions, including superannuation guarantee obligations, are not liabilities owed to the trustee of the fund and therefore not amounts owed to the fund in respect of a member.

    If you believe you have identified a situation where you owed an amount in respect of your member and need further help, contact us by emailing SuperCRT.

    Statement on inactive low-balance accounts

    For each unclaimed money day, you must give the ATO a statement in the approved form of information for each ILBA.

    If, at the end of the unclaimed money day, there are no balances held in ILBA, the statement must say so. A superannuation provider that has no balances held in ILBA (that is, no members to report), can report via the Business Portal using the Non-lodgment advice (NLA).

    You are not required to pay us any amount in respect of an account that was an ILBA at the end of the unclaimed money day, but was not an ILBA at the earlier of the time the payment is made or the end of the scheduled statement day.

    Accounts first need to meet the criteria for ILBA as at unclaimed money day. Funds then need to determine, at statement day, whether those accounts still meet the criteria. Accounts that did not meet the criteria as at unclaimed money day are not in the pool to be determined as at statement day.

    Example: Account no longer an ILBA at scheduled statement day

    Chantelle has an account with Ace Super that has a balance of $5,985 and meets all of the criteria of an ILBA at 30 June 2019.

    On 15 July 2019, adjustments are made to her account for the year ended 30 June 2019. Her account is credited with earnings of $64 and debited with fees and charges of $28 resulting in an adjusted account balance of $6,021.

    Chantelle has no further activity on this account up to the scheduled statement day on 31 October 2019.

    As Chantelle's account balance is over $6,000, it is no longer an ILBA at the scheduled statement day. The trustee of Ace Super is not required to pay the balance of the account to the ATO.

    End of example

    Next steps:

    Family law payment splits

    If your member’s account is (or could in the future) be subject to a family law payment split, you should take into account only the member's entitlement to payment remaining after any reduction by that payment split. The amount of any reduction as a result of a payment split is referred to as the non-member spouse amount.

    You must also pay the non-member spouse amount to the ATO for the non-member spouse. This amount is due and payable at the end of the scheduled statement day for the unclaimed money day.

    See also:

      Last modified: 05 Mar 2020QC 61055