Assistant Minister for Superannuation Jane Hume has defended the ATO when it comes to reuniting people with their lost super, saying the ATO has reunited twice as much super in three weeks than an industry super owned fund has in two decades.
Senior members of the superannuation industry were recently quizzed by a Parliamentary Committee about AUSfund, an industry super fund owned ERF (Eligible Rollover Fund) – a fund designed to look after lost and unclaimed super.
Chair of the Committee, Liberal MP Tim Wilson, asked why industry super funds were transferring lost and unclaimed super to AUSfund instead of the ATO.
There was a dramatic spike in the amount of superannuation transfers from other funds into AUSfund – up from $85.8 million in 2017/18 to $818.3 million in 2018/19. This increase in transfers came in the same period that the Government passed legislation – the Protecting Your Super package – expanding the amount of lost super that had to go to the ATO.
Data source: AUSfund annual reports. Note: prior to 2015/16 transfers in were not reported separately from contributions
Wilson asked: “The intention of the protecting your super scheme was essentially to transfer low-balance inactive accounts through the Australian Taxation Office. You’ve moved them in advance, before, which reactivates those accounts, doesn’t it?”
Ian Silk, Chief Executive of AustralianSuper, said super funds used AUSfund because it was “most active and proactive mechanism for reuniting inactive accounts with active accounts in the industry”
Matthew Linden, Deputy Chief Executive of Industry Super Australia, told the Committee that AUSfund has a “lot of experience” in data analytics.
“In the work that they do in terms of trying to find members’ money, they have quite sophisticated techniques in terms of making use of publicly available information to try and track down and find members to reconnect them to their savings.”
Since being allowed to start using TFNs to match accounts in 2016, AUSfund has has an “enhanced consolidation process which they’ve run to ensure that members’ savings are reunited with them as quickly and efficiently as possible”.
Linden said one of the issues with lost super going to the ATO was that, until recently, there was no proactive matching “at all”.
“The money just sat there. It’s actually treated in the budget as revenue on the balance sheet,so, in fact, these lost and inactive accounts which haven’t been proactively consolidated have been assisting the budget bottom line. I think many people who’d like their money reconnected to them would have been far happier with that money being reunited with their active superannuation account.”
Linden noted that the return paid by AUSfund is “around five time higher than what they would have achieved in the ATO”.
AUSFund charges $11.50 a year in admin fees plus 0.63% in indirect costs, and has returned 7.63% p.a. over the last ten years. Lost super held by the ATO isn’t charged fees, but only receives interest at the rate of CPI – which in 2018/19 was 1.6%. Hostplus told the Committee that size of account balances was a factor in deciding to send accounts to AUSfund or to the ATO, with accounts under $350 going to the ATO because it was in the best interest of members. Originally only lost accounts under $200 had to go to the ATO, before it was raised in stages by successive governments to $6,000. But it was only recently that the ATO was given more proactive powers to reunite people with their lost super.
Linden told the Committee that, since the “enhanced cross-fund-matching program” has been in place, AUSfund has had a matching ratio of 42% – rolling out 200,000 members with 475,000 rolled in.
“The ATO have only just released data on their proactive fund matching. In comparison, they received 2.3 million accounts under PYS [Protecting Your Super] and matched out 684,000 to active super accounts. That’s a ratio of 27.9 per cent.”
Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume, defended the ATO, in a letter to the Australian Financial Review.
In the letter, Hume said Linden had “failed to also include money that had been paid directly to individuals’ bank accounts, which totalled an additional 157,000 accounts worth $161 million”.
“Prior to the Morrison government’s Protecting Your Super (PYS) changes, the law only permitted ATO-held accounts to be matched and reunified when directed to do so by the account holder. The ATO commenced reuniting superannuation from November 1. As at November 21, more than 1.56 million accounts worth nearly $2.07 billion have been proactively matched and paid to a member’s active super account or directly to their bank account.”
“This means the ATO has reunited twice as much superannuation to its rightful owners in three weeks as AUSfund has in over two decades.”
“With sophisticated data-matching technology and visibility of all contributions to every superannuation account in the system, rather than just a sub-set of funds, the ATO will always be better equipped to reunite these amounts with members’ active accounts. Funds simply do not have the full suite of tools available to the ATO.”
Lost and unclaimed super reached a new high of $20.8 billion as at June 2019, according to ATO statistics – up $3.3 billion from a year earlier. Thought the ATO has yet to release figures on how much of this super is held by the ATO and how much by super funds.
As at 30 June 2019, AUSfund held $1.357 billion in member super balances. As at 30 June 2018 – the latest figures available, and prior to the passage of the Protecting Your Super legislation – the ATO held $3.3 billion in unclaimed super for Australian residents.