It’s a case of ‘use it or lose’ when it comes to lost super savings or unused bank accounts. New reforms make it more important than ever to track down money that’s rightly yours.
One of the key sources of unclaimed money in Australia is superannuation savings. There is currently around $17 billion sitting in 3.4 million lost super accounts held with the Tax Office. That sum is about to get even bigger.
Super funds have until 31 May 2013 to hand over any idle superannuation savings worth up to $2,000 to the tax man. Previously, forgotten super accounts were only transferred to the Tax Office if the balance was $200 or less.
There are good reasons for upping the limit on super accounts classified as ‘lost’. Analysis by the federal Treasury shows plenty of small super balances are eroded by fees and charges without the fund member even knowing about it.
Under the current rules for instance, a 20-year old with $1,000 in super can unknowingly have their super savings eroded to just $418 after five years by a range of fees and deductions.A 30-year old with $2,000 can have their savings eroded to just $1,250 after five years.
It works this way because fees and insurance charges typically can exceed average investment earnings, even for accounts worth $2,000.
From 1 July 2013 lost super accounts transferred to the Tax Office will be protected from fees and charges, and interest will be paid on the balance at a rate equivalent to inflation.
You can reclaim this money at any time using the Super Seeker function on the Tax Office database (www.ato.gov.au). Once a fund is transferred to the tax man you’ll lose any life insurance cover. So act now.
Contact previous employers for details of any former super funds or check out the government’s “Super Fund Lookup” search tool if you know the name of the fund your employer’s contributions were paid into. If you find any inactive funds it’s worth rolling the balance over to your main super account.
It’s also a smart strategy to pay a visit to any bank accounts you haven’t used in a while. This could include savings accounts where you’ve set cash aside for kids or grandkids, or just deposited some money several years ago in case of a rainy day.
From 31 May 2013 any bank account that’s been inactive for more than three years (down from seven years previously) will be handed over to our investment watchdog – the Australian Securities and Investments Commission (ASIC).
Like lost super, you can reclaim the money from ASIC but it’s a reasonably drawn out process. If you have an account that you know hasn’t been used for three years, depositing as little as $1 into the account will prevent it from being regarded as inactive.
Any bank accounts that do make their way to ASIC will earn interest equal to the rate of inflation from 1 July 2013.
ASIC’s consumer website MoneySmart (www.moneysmart.gov.au) features an online database that lets you check if any unused bank accounts belong to you.