Zombie super: Time is running out to bring accounts back to life

Time is running out if you want to bring your old “zombie” superannuation accounts back to life. A major change to the $2.9 trillion super industry is coming into effect on 31 October – which just happens to be Halloween. Spooky coincidence?

If you think you may have a “zombie” superannuation account – one that hasn’t had any payments made into it for 16 months or more – and you want to keep it, you have until 31 October to let your fund know. That’s when the latest phase of changes made via the The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2019, created in response to findings from the Royal Commission into the banking industry.

The Bill, passed earlier this year, was designed to help “protect individuals’ retirement savings from erosion” through charges such as unwanted insurance fees, according to the Australian Taxation Office (ATO). The new law also prevents super funds from charging an exit fee if any account holder wants to leave the fund. ATO figures suggested that exit fees were about $70 on average.

There are a few other changes that apply only if a super account has been declared “inactive” – if the super fund’s records show that there has not been an account transaction for 16 months and there has been no contact with the account holder:

  • funds are now required to cancel insurance policies on those accounts (and therefore stop charging fees for that insurance);
  • there’s now a fee cap on inactive accounts with less than $6,000 in them (3% of the total balance per year);
  • funds must transfer the balance of all inactive accounts with less than $6,000 to the ATO, where the balance would be automatically merged – within 28 days – with another active super account (the ATO will hold onto this money if you don’t have an active super account).
A group of smiling women celebrate at a cafe.
Image: WPadington (Shutterstock)

The past few months have already seen super funds try to contact members with “zombie” accounts in light of the first round of changes which came into force on 1 July – including the cancellation of insurance. However, the deadline for the first round of transfers of low-balance inactive accounts is 31 October, which means if you haven’t responded to your super fund’s letter, email or call about the inactive account, the money in it will end up at the ATO by this date, and will then eventually be combined with a superannuation account belonging to you that is active according to their records. 

The ATO says that all super accounts will then be reviewed by super funds every six months (on 30 June and 31 December) to check if they are inactive. Those accounts deemed inactive on those dates would be rolled over to the ATO by 31 October and 30 April, respectively.

What is an “inactive low-balance super account”?

The ATO states that an account needs to meet certain criteria for it to be declared as an “inactive low-balance super account”.

  • no amount has been received by your fund for crediting to that account for your benefit within the past 16 months
  • the account balance is less than $6,000
  • you have not met a prescribed condition of release
  • the account is not a defined benefit account
  • there is no insurance on the account
  • the account is not held in a self-managed super fund (SMSF) or a small Australian Prudential Regulation Authority (APRA) fund.

However, if you have done any of these things in the past 16 months, your account will be classified as active: 

The ATO says that if an account is in debt – meaning you owe money to the superannuation fund – it also will be deemed as active. 

What happens after the ATO receives the balance of my “inactive low-balance super account”?

When the ATO receives the balance of your inactive account, it will be “consolidated” – merged into – an existing, active superannuation account. You can nominate a main super account – or, as the ATO calls it, your “financial institution details” – on the MyGov website (under the Super tab). 

Alternatively, if the balance on your inactive account is less than $200 or you’re over 65 years old, the ATO says it will directly pay you the entire inactive account balance, rather than putting it into an active super account.

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The ATO states that an eligible active super account is one that:

  • is held by a person who has not died
  • in the accumulation phase (i.e. you have not retired)
  • accepts government rollovers
  • has received a contribution in the current or previous financial year
  • has or will have a balance equal to or greater than $6,000 after the transfer of certain types of ATO-held super is.

“You may also be able to withdraw your ATO-held super if you meet certain conditions,” the ATO states.

How do I let the ATO or my super fund know that I want my account to remain active? 

To let the ATO and your super fund know that you want an account to remain active, the ATO recommends filling out this form and sending it to your super fund. The ATO warns that if the low-balance account stays with the super fund, “your retirement savings will continue to be subject to fees and charges” and adds that by “authorising your super fund to provide a written declaration to the ATO, your inactive low-balance account will stay with your super fund and the ATO cannot consolidate this account on your behalf”.

You will need to provide your contact details and the details of the account, which can be found on your superannuation statement or on your MyGov account. You’ll also need to sign the form before you send it in. 

How do I check if I have zombie super accounts? 

If you haven’t been contacted by a super fund but suspect you do have a “zombie” account, there are a couple of quick ways to find out: 

  • You can contact your active super fund and ask them to search for you
  • You can create a MyGov account (the Australian Government’s services portal) if you don’t have one already, and link it to the ATO. The ATO should have a record of any super accounts that they can link to your tax file number. 

Canstar note: Consolidating super funds is beneficial for many people but isn’t right for everyone (we explain some of the reasons why here), so the pros and cons should be carefully weighed up. When seeking the right fund for you there are many factors to consider, such as the fees charged, whether the insurance offering is suitable for you and the education and advice available. Past performance is an important consideration because it gives an indication of what a fund has been capable of delivering in the past through varied market conditions. However, investments can go up and down, so past performance is not necessarily indicative of future performance.

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