Protecting Your Superannuation Package Bill: Committee Reports on Government Bill

Thursday 13 September 2018 @ 12.03 p.m. | Corporate & Regulatory | Taxation

The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (Cth) (the Bill) was introduced into the Federal Parliament by Minister for Revenue and Financial Services, Kelly O’Dwyer, on 21 June 2018. The Bill was then referred to the Senate Standing Committee on Economics (the Committee) which reported on the legislation on 13 August 2018. The Government states that the Bill makes amendments that ". . . will protect individuals' retirement savings from erosion,  ultimately increasing Australians’ superannuation balances."

About the Bill - Key Amendments

Protections with respect to fees

The Bill makes amendments to prevent trustees of superannuation funds from charging administration and investment fees that exceed three percent per annum, on the balance of accounts which are below the sum of $6,000. The Government has said that this addresses the problems caused by previous government decisions that removed low-balance accounts protections in 2013.

A further change in respect to fees is a change that prevents trustees from charging exit fees when a fund member closes or rolls over their superannuation account - regardless of their balance. The Minister has indicated that this change will help to prevent the erosion of low balance accounts. Further, these changes, the Minister claims, will remove the existing disincentive to superannuation fund members consolidating and closing unwanted superannuation accounts.

Insurance arrangements in superannuation

The Bill provides that fund trustees will be required to provide insurance on an "opt in basis only" to new superannuation fund members: 

  • aged under 25 years, 
  • with account balances below $6,000, 
  • and members with inactive accounts, 

unless, otherwise directed by a superannuation fund member.

These changes to insurance arrangements in superannuation are argued by the government to better target default insurance cover and prevent the inappropriate erosion of retirement savings by insurance premiums for cover that often members do not know they have and goes beyond what they need, or for which they cannot even make a claim. Superannuation fund members would still be able to obtain insurance cover within their superannuation if they require it. Young, inactive and low balance superannuation account holders will, under the changes made by the Bill, still be able to opt in to insurance as part of their superannuation.

Dealing with inactive super: The Bill makes further changes with respect to superannuation accounts below $6,000 to protect them from fees and charges by requiring inactive accounts to be transferred to the Commissioner of Taxation if they have been inactive for a "continuous period of 13 months". The Commissioner will then be given the power to proactively pay these amounts, plus lost accounts already held by the Australian Taxation Office, into the rightful owner's active superannuation account. 

These measures according to Minister will increase the rate of account consolidation across the superannuation industry; reduce the number of inactive low-balance accounts at risk of erosion and reduce insurance premium and fee duplication for many superannuation members.

Senate Standing Committee on Economics Report

The Committee recommended that the Bill be passed with no amendments. According to Investment Magazine, the committee's findings have been made "[d]espite heavy lobbying from the country’s biggest superannuation fund, AustralianSuper, and others". The Committee supported the Minister's view that there are inadequate protections for super fund members who hold low balance accounts, and that the Insurance in Superannuation Voluntary Code of Practice has not been a sufficient measure to deal with this concern, saying "industry action has been slow and does not go far enough to protect members’ interests”.

A key concern for superannuation fund providers making submissions was the proposed start date for implementation (namely, 1 July 2019), because of the need for fund providers to renegotiate the terms of insurance contracts with the insurers providing it.

Another area of superannuation industry concern was the Bill's proposals to make insurance "opt in" for fund members under 25 years of age and for accounts with balances under $6000, and to cease cover for accounts that had been inactive for 13 months, with the industry arguing this could actually lead to higher premiums and might also disadvantage those needing cover.

On the insurance changes, Michael Easson, the independent chair of the Association of Superannuation Funds of Australia (ASFA) writing in the Sydney Morning Herald states that: 

"The changes [to in superannuation insurance] need to be thought through. . . . For most Australians, life, disability and income protection insurance is provided within a person’s superannuation account. Pooled insurance cover and shared risks over groups of lives has led to lower premium rates – lower than what could be the case for myriad individuals each taking out their own cover."

KPMG was reported in May as saying that super fund members might pay up to 30 percent more for cover under the government’s federal budget measures.

As part of the Committee, Labor senators submitted their own reports essentially expressing that they were “cautiously supportive” of the Bill. They also pointed out that the Productivity Commission was also preparing a report into the efficiency of the country’s $2.6 trillion superannuation sector in which it would consider the impact of insurance premiums on retirement incomes.

On the question of implementation and industry concerns about the start date Labor senators indicated the committee would “continue to evaluate these concerns and seek to find suitable amendments that will improve the legislation”.


Now that the report has been tabled in the Senate, the Bill can be debated and progressed through the senate. The speed of the Bills progress however, will depend the government's view of how quickly they can get the legislation through the process. The Labor minority report leaves open the possibility that Labor will call for amendments and that such will delay progress.

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