The bill enacting the 2018 federal budget proposal to have all inactive low-balance (under $6000) superannuation accounts transferred to the ATO has taken into account the concerns of SMSFs running deliberate multiple-fund strategies.
The measure had the potential to jeopardise SMSF trustees who strategically retain a small asset balance in a public offer fund to maintain the risk insurance cover they received via the larger fund.
Speaking at the recent SMSF Professionals Day 2018, co-hosted by SuperConcepts and selfmanagedsuper, SuperConcepts technical services and education general manager Peter Burgess told delegates: “The [Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018] that has now been introduced into Parliament had a new section inserted which said if the account is being used to maintain insurance cover, then that will not be considered to be an inactive low-balance account.
“That seems to have been inserted to get around the situation where we’ve got self-managed super fund members who have these low balances that they maintain in these APRA (Australian Prudential Regulation Authority) [regulated] funds to keep insurance.”
Burgess did, however, point out SMSF trustees using this strategy still needed to perform one task to ensure their inactive low-balance account would be left alone.
“The one thing to note though is that in order to trigger this clause, SMSF members, if they’ve got these low-balance accounts in APRA funds, still need to opt in for insurance in that APRA fund,” he said.
The onus for this procedure, though, was not entirely upon SMSF trustees, he noted.
“The way we understand it’s going to work is in the lead-up to 1 July 2019, APRA funds will be writing to their members who have low-balance inactive accounts alerting them to the fact that they’re going to need to opt in if they want insurance,” he said.