Why the 'Protecting Your Super' changes mean you could lose your insurance after 1 July 2019
Did you know that some of the laws about how your superannuation account works are changing on the 1 July 2019?
If you have received a letter from your super fund about the changes, and filed it in the 'round file'' or left it sitting unopened somewhere, dig it out and have a read because the changes are really important!
There are two key things to be aware of if your account is considered 'inactive'.
1. if your balance is less than $6000, it may be automatically rolled over to any 'active' super account you have
And this is the BIG one:
2. Regardless of how much is in your account, any insurance policy that's attached to your superannuation fund is likely to be cancelled.
What's an inactive account? Well, the rules are different depending on your account balance. If you have less than $6000, you can make your account 'active' by updating your details such as changing your investment options or your nominated beneficiary.
But the rules are different for insurance, and many people will possibly get caught out and lose cover that they may not be able to replace.
The laws for the insurance cancellation state that unless you've made active contributions in the past 16 months OR elected and notified your super fund in writing to continue the cover, then insurance will be cancelled EVEN IF your account balance is more than $6000.
Bottom line is that if you want the insurance to continue on an 'inactive' account, you must either make an active contribution OR put IN WRITING to your fund that you want the insurance to continue. They're the ONLY way you can keep your cover under s68AAA of the SIS Act.
The good news is that just $1 contribution (from you, your employer, or a spouse if you have one) will generally count, but it's a really good idea to get in touch with your super fund to make sure you meet any requirements they have.
Whatever you do, don't just recycle the letter and think everything will be okay!
If you want a straightforward overview, there's some discussion on the MoneySmart website here: https://www.moneysmart.gov.au/…/how…/insurance-through-super
If you want the detail of the law, the amending Act is here: https://www.legislation.gov.au/Details/C2019A00016 and the Regulations are here: https://www.legislation.gov.au/Details/F2019L00539