The 1 July 2019 changes to life insurance under the Protecting Your Superannuation Package Bill have been largely reported on, but are worth repeating, just to be sure you’ve got the message.

In the SMSF context, there are numerous situations where members have rolled in most of their balance from an APRA fund, but not all, as they have retained an APRA fund balance to continue to fund insurance premiums

The Bill prevents APRA fund trustees from providing opt out insurance to members with inactive MySuper or choice accounts, unless a member has directed otherwise.

Where an APRA fund trustee identifies a member with a superannuation account, which on 1 April 2019 had been inactive for at least 6 months, the trustee must have given the member a written notice before 1 May 2019 that stated:

• From 1 July 2019, the fund will not provide the member with insurance cover if the account remains inactive;
• Cover can be maintained if the member elects to do so; and
• Sets out the method for election.

Immediate action needs to be taken if the maintenance of cover is required however, quite apart from the Bill, many APRA funds will not maintain insurance cover in an inactive account unless there are ongoing contributions in any case.

In addition to the insurance provision, there is an additional change that will apply to low balance member accounts. Super providers, excluding SMSFs and small APRA funds, will be required to report and rollover inactive low-balance accounts to the ATO as a new category of unclaimed super money by 31 October 2019. The ATO will then proactively consolidate these amounts into active super accounts with a view to creating a consolidated balance of greater than $6,000 unless the member has requested a direct payment or nominated a specific fund.

A low balance superannuation account containing insurance cover will not be transferred to the ATO however this exemption will not apply if the account is inactive and the insurance cover has lapsed.

The ATO plans to start proactive consolidation from November 2019 and notify members when it has done so.

While SMSFs are not be required to report and pay inactive low-balance accounts, they may receive a rollover of consolidated accounts for members so keep an eye out from November.