Views on the Bill
As noted in the preceding chapter, the Bill makes amendments which bring
forward the time at which money is recognised under the relevant law as lost or
According to Treasury, the benefits from these amendments for consumers
would be twofold. First, the amendments would, in effect, bring forward the
time when details of unclaimed moneys are published in publicly searchable
databases and the ATO can use its data matching resources 'to match more of
these accounts with an active account the owner may have,' thereby helping
reunite people with their money sooner.
Second, the amendments would, Treasury argued, help to protect unclaimed
moneys from erosion by inflation and fees and charges. Treasury provided a
number of examples in its submission of how the amendments would protect
unclaimed moneys, and pointed to several of these examples during the public
Analysis that we have included in our submission points to
the typical fees and charges and the typical earnings on small accounts. For
example, a small [superannuation] account of $1,000 of someone who was 20 years
old would have earnings, based on average industry earnings, of around $54 and
would have fees of that same amount as a result of the member protection
provisions but would have insurance charges of typically $116. That account
would go backwards by $116 as opposed to if it were held as lost money,
unclaimed moneys, with the tax office, where it could be expected to earn
interest at CPI. ... [A] 20-year-old with insurance ... [paying] typical fees and
charges and [receiving] typical earnings over a five-year-period could be
around $700 better off [under the proposed arrangements, than if he or she
were] having an inactive account eroded over that time.
While several submissions questioned the timing and particulars of the
Bill, submissions were generally supportive of its policy intent, and the
potential benefits the amendments would provide for consumers. For instance,
CHOICE suggested that, with the earlier transfer of unclaimed monies, 'the
erosion of balances through fees, commission and adverse market movements is
substantially reduced.' Furthermore, the payment of interest in accordance with
CPI ‘will ensure that the real value of the unclaimed money is preserved.’
Schedules 1, 2 and 3 – Bank Accounts, First Home Saver Accounts and Life
The reduction of the inactivity
period from seven to three years
As explained in the previous chapter, Schedules 1, 2 and 3 of the Bill
amend the Banking Act, FHSA Act and Life Insurance Act to reduce the period of
inactivity before bank accounts, FHSAs and life insurance moneys are treated as
unclaimed from seven years to three.
Submissions from the Australian Bankers' Association (ABA), the
Commonwealth Bank of Australia (CBA) and the Association of Financial Advisers
(AFA) suggested three years was too short a period of inactivity to deem an account
unclaimed, particularly given the growing number and type of accounts that customers
intentionally leave inactive for extended periods.
The committee also heard concerns that the shorter period of inactivity
would increase the number of transfers of moneys that are not genuinely ‘unclaimed’
from ADIs to ASIC. These moneys would, in turn, need to be transferred back to
the ADI, imposing unnecessary costs on both ADIs and the government. For
instance, in its submission, CBA noted that the amendments would add to its
costs, as more accounts needed to be transferred to ASIC and in turn recovered,
with an attendant increase in customer enquiries throughout this process.
Several banks and banking groups also suggested that customers would
experience stress and inconvenience as a result of discovering that accounts
they thought were still held by the ADI were in fact closed, and the ensuing
process they would need to go through to reclaim their money.
Several submissions also challenged the government’s claim that owners
of inactive accounts would be better off once the money in those accounts was
transferred to ASIC. Abacus, for instance, refers to examples of accounts where
the interest paid is higher than CPI.
Similarly, ING Direct reports that its basic savings account pays higher-than-CPI
interest and does not charge fees.
An analysis by CBA, meanwhile, reported that the majority of account balances
held by CBA that would be impacted by the amendments actually receive a
higher-than-CPI rate of interest.
AFA also suggested that some customers may have accounts where a higher
rate of interest is dependent on an absence of transactions, so requiring a
transaction in such cases to avoid a transfer of the funds to the government
will leave the customer worse off.
However, Treasury explained that until an account was transferred to
ASIC and entered into ASIC’s online database as unclaimed money, there was no
easy way for people to search for old accounts. The three year timeframe therefore
enhanced the likelihood of unclaimed money being reunited with its owner:
The data shows that if people are going to find unclaimed
moneys, the shorter the period between when the account was last used and when
it is found the more likely it is to be matched and actually returned to the
rightful owner. So it is really about getting those accounts onto the ASIC
register where it is publicly searchable sooner.
Treasury’s submission maintained that the typical unclaimed money owner
will be financially better off as a result of the amendments. According to
Treasury, the low balances of most unclaimed accounts indicates many of these
accounts are likely to be transaction accounts, which typically attract
negligible or zero interest. Moreover, life insurers do not pay interest on
insurance policies. Further, even if unclaimed accounts are earning interest,
this is likely to be insufficient to keep up with inflation in many cases, and interest
earnings are normally subject to tax, whereas the government intends to
introduce legislation in early 2013 to exempt the CPI interest paid against
government-held unclaimed moneys from tax. Moreover, Treasury submitted that
while ‘interest rates on savings accounts can be higher, quoted rates often
include time limited special offers that may only last for a few months before
reverting to a lower rate.’
Treasury also notes that fees can significantly erode inactive bank accounts,
with many accounts having fees of between $2 and $6 a month.
Exemption of certain account types
Submissions from ABA, Abacus and CBA recommended that certain types of
accounts that are often intentionally left inactive should be exempted in part
or in full from being considered 'unclaimed' after only three years of
inactivity. Accounts referred to in this respect include first home saver
accounts; term facilities and deposits, although submissions suggested the need
here was simply to confirm that the current exclusion of such accounts from unclaimed
money provisions would be maintained; youth accounts, which are often set up
shortly after a child's birth, but then left inactive for a number of years;
offset and redraw accounts; and linked accounts.
Abacus also pointed out in its submission that if an account is inactive
it must be transferred to ASIC even if the account holder has been in touch
with the ADI and expressed a desire to maintain the account. To remove the
possibility of such accounts being treated as unclaimed, Abacus suggested it
would be 'sensible if the need to transfer an account where no transactions
have been made was waived where an ADI has contacted the account holder and the
account holder has confirmed that they wish to continue holding the account
with the ADI.'
Submissions from Abacus, ING Direct and CBA suggested that where a
customer holds multiple accounts with an ADI, activity in one account should be
sufficient to ensure all accounts are treated as 'active' and therefore not
transferred to ASIC as unclaimed moneys.
While ABA reiterated its concerns to the committee regarding the type of
accounts that might be captured by the amendments, the ABA also reported to the
committee that it had been in regular discussions with Treasury about the
amendments generally and had found Treasury to be 'very good in seeking to
understand the issues that have arisen'.
Responding to concerns about the range of accounts that could be deemed
unclaimed after three years of inactivity, Treasury emphasised that there is
nothing in the current Bill that changes the long-standing definition of
unclaimed moneys in the Banking Act.
Moreover, as the Explanatory Memorandum indicates, regulations may be
used to 'exclude certain accounts and deposits from being treated as unclaimed
moneys.' Specifically, the Bill adds new subsections (in Schedule 1, item 4, proposed
subsections 69(1B), 69(1C), 69(1D) and (69(1E)) to the Banking Act which, in
effect, provide the necessary regulatory power to define if and when certain
types of accounts and deposits are deemed 'unclaimed moneys.' This provides the
government with the flexibility to exempt certain types of inactive accounts
from being captured as ‘unclaimed money’ when it is considered necessary to do
Timeframe for implementation of
Submissions from ABA, Abacus and banks were critical of the short
timeframe for implementing the amendments.
As ABA put it:
...the proposed implementation for this change does not allow
sufficient time for banks to make the necessary changes to systems, procedures,
processes, terms and conditions, customer communications and other
documentation and other compliance requirements or to provide their customers
with necessary communications about the new arrangements.’
Abacus acknowledged in its submission that the normal deadline for ADIs
to report and transfer unclaimed moneys as at 31 December will be extended
by the Bill from 31 March 2013 to 30 April 2013. However, Abacus
contended that this extra month for reporting and transferring unclaimed money
is of little benefit to the ADIs its represents, as most 'of the activity
around managing unclaimed monies and account transfers needs to be dealt with
in the period prior to 31 December cut-off.' In particular, ADIs need to
contact potentially affected account holders to inform them of the ADIs
obligations to transfer inactive account funds. The difficulties of getting in
touch with potentially affected members in a one month period (assuming the
Bill is passed in late November), according to Abacus, is compounded by the
fact that many account holders will be on holidays, and the change in the
inactivity timeframe means five times as many account holders will need to be
contacted this year than would usually be the case.
The committee was also informed that banks freeze their IT systems in
the lead up to the Christmas period to reduce the risk of system instability. As
a result, it was argued that it would be difficult to implement the changes in
the timeframe currently proposed. As ABA informed the committee:
What we do ... at this time of the year, is wind down and
freeze any changes to those systems because any change to the system can cause
disruptions if something goes wrong. The view the banks take is that, while we
would not want that at any time of the year, particularly in the run-up to
Christmas, we would not want to see, for example, payment systems problems.
Abacus also suggested in its submission that the implementation challenge
was likely to be particularly significant for smaller ADIs:
...which do not typically have the capacity to rapidly
implement and scale up the new processes needed to implement this sort of
change. As a consequence, it is likely that it will simply not be possible to
contact many affected account holders before the initial 31 December
deadline, which also increases the likelihood of monies being transferred to
ASIC which are not truly 'unclaimed.'
The tight timeframe would, in Abacus' analysis, result in a higher level
of unnecessary transfers of funds and this, in turn, would lead to a higher
incidence of double-handling of money as money is transferred to ASIC and then
back to the ADI, at a cost to both the government and ADIs.
Despite the implementation difficulties, the ABA conceded that these
difficulties were not insurmountable. Rather, it would be a case of committing
additional resources in order to implement the amendments in time. 
Treasury’s submission points out that ADIs and life insurers already
have systems in place to identify and transfer unclaimed moneys to ASIC; the
amendments simply bring forward the relevant time period in which the transfers
need to occur. 
Treasury also told the committee that while banks and banking groups had
expressed concerns regarding the timeframe for implementation, it believed that
banks would ultimately be able to implement the changes in a timely manner.
Schedule 4: Superannuation
Raising the threshold below which
'lost member' accounts are transferred to the ATO
As explained in the previous chapter, the Bill will increase the account
balance threshold below which lost accounts are required to be transferred to
the ATO from $200 to $2000, effective from 31 December 2012. A ‘lost account’
is one where the member is ‘uncontactable,’ as defined in the relevant
regulations, or where the account has been inactive for a period of five years.
The increase in the threshold is intended to protect more small lost accounts
from being eroded by fees and charges. As Treasury explained, an 'account up to
an amount like $2,000, if it is an account that is not having contributions
made to it, would typically be going backwards.'
This is because the fees and insurance premiums on smaller accounts represent a
higher proportion of the account balance and will typically exceed any account
In its submission, the Institute of Chartered Accountants in Australia (ICAA)
welcomed the proposed increase in the threshold:
At this level, meaningful amounts of retirement savings can
still be protected from erosion through fees and also be eligible for earnings
in the form of interest payments once amounts are with the ATO. We believe this
is in the interests of members. It also provides a longer term view of the
super system whereby amounts protected now will lessen the impact of reliance
on aged pension and government resources later. 
While supporting the policy intent of the measure, submissions from
ASFA, the Australian Institute of Superannuation Trustees (AIST) and the
Financial Services Council (FSC) suggested that the increase in the threshold would
inadvertently increase the number of active accounts that needed to be
transferred to the ATO. These submissions argued that lost member accounts that
are still receiving contributions are, as Mercer put it in its submission, ‘not
lost in the true sense of the word, even though they technically satisfy the
definition of lost members.’ These submissions argue that the transfer of such
accounts would not be consistent with the policy intent of the Bill, and ‘will
often work against the interests of members.’
As AIST explained in its submission, the $200 threshold in effect limits
the number of active 'lost member' accounts that need to be transferred to the
ATO, as anyone earning over $2222 in a six month period would have received at
least $200 in superannuation contributions in that period. As a result, an
active account of anyone earning above $2222 within six months would not be
eligible for transfer, even if mail is returned unclaimed within this period.
In contrast, a member would need to earn over $22,222 in a six month period to
receive contributions of $2000, and an active account of an 'uncontactable'
member earning under this amount would therefore need to be transferred to the
AIST also noted that the problem of transferring active accounts to the
ATO is 'most likely to impact new employees, young people, and low-income
AIST told the committee there were a number of scenarios wherein a
member can be both uncontactable (and therefore deemed a 'lost member') and
still have an active account:
That can include a member not supplying their address to
their super fund when they join; their employer not supplying a proper address
to the super fund at the time the member joined the fund; the details provided
to the super fund being incorrect; or the member having changed address and not
having notified their superannuation fund.
FSC added that as the regulations and Bill are currently written, it
would be possible for a member to be deemed a 'lost member' and have their
account transferred to the ATO 'within a matter of months of joining the fund
or of moving house and changing their address without notifying the fund.'
ASFA suggested that the increased transfer of active accounts would
result in a 'merry-go-round' of money. For instance, an active 'lost member'
account might be closed and the money transferred from the superannuation
provider to the ATO. The next employer contribution would then trigger the
creation of a new account with the provider and, after the new account was
reported to the ATO on the Member Contribution Statement for the year, the ATO
would need to transfer the unclaimed money back to the provider for deposit in
the new account.
To reduce the incidence of active accounts being deemed 'lost', the FSC
suggested a minimum two year membership period before this can occur.
Similarly, AIST suggested that the regulations stipulate a minimum period of
membership before an account can be deemed 'lost.'
To prevent active accounts being transferred to the ATO, AIST recommended
that the definition of 'lost member accounts' in regulation 1.03A(1)(a) of the
SIS Regulations exclude accounts where there has been a contribution or
rollover within the last two years.
In its submission, AIST also argued that the returned mail trigger for
deeming a member 'uncontactable' should be revised to reflect technological
changes. For instance, it is currently the case that if a trustee has a
member's phone number, and an outbound call to that number results in confirmation
that it is the correct number, that member can still be considered
'uncontactable.' Specifically, AIST recommended that trustees be able to
determine that an account of an 'uncontactable' member does not need to be
transferred to the ATO where the member has had contact with the fund within a
specified period, for example, by email or by contacting a call centre.
Similarly, ASFA noted that the 'lost member' definition is around 20
years old. ASFA suggested that in an era where engagement with members is much
broader than mailed communications, trustees should be able to recognise a
broader range of ways in which members engage with the fund – for example, by
accessing their account online or contacting a call centre. ASFA also
emphasised that contact between a fund and members, particularly in the current
day, is a two-way street: 'If a member makes contact with the fund, obviously
they know which fund they are in and they are engaging with their membership.'
Treasury told the committee that, in cases where a lost member account
is still receiving contributions:
...in most circumstances that should give a reasonably good
line of investigation for funds to be able to make contact with such members.
If the member is actively making contributions then by pursuing a line of
inquiry through, for example, the employer where those contributions are being
made in most circumstances that should give a reasonable prospect of being able
to make contact. It may be that under this measure with the increased threshold
there is a greater incentive for funds to do that.
Treasury told the committee that superannuation providers also had a
number of other options for locating lost members, including for lost member
accounts that remain active. Such steps might include checking the superannuation
provider’s own data to see if the member has other accounts with more current
information, or engaging a company like Australia Post to undertake database
searches to locate a member.
Crossover with auto-consolidation
In its submission, ASFA noted that legislation is already being
developed to implement an auto-consolidation of accounts process, which is
proposed to commence from 1 January 2014. ASFA suggested that this
auto-consolidation process, which is envisaged to apply to superannuation
accounts of under $1,000, would generate much the same outcome as the unclaimed
money process for accounts under $1000, but in an eight month longer timeframe.
Mercer referred to the same issue in its submission, and suggested that
greater efficiencies could be achieved by integrating the superannuation
amendments in the Bill with the proposed legislation on the consolidation of
accounts within and between superannuation funds. 
Treasury acknowledged that there will be some crossover between the
superannuation measures in the Bill and the auto-consolidated measures being
developed, and noted 'this is something that the government will need to give
further consideration to'. 
Loss of insurance coverage
Submissions from ASFA and AIST noted that 'lost members' will lose
insurance coverage when their accounts are transferred to the ATO. It is
already the case that accounts transferred to the ATO lose any attached
insurance coverage, but the $200 threshold limited the impact of this, as an
account with less than $200 would be unlikely to have sufficient funds to pay
for insurance premiums in any case. However, these submissions suggested that
accounts nearer to $2000 often have sufficient money to maintain insurance
coverage for a number of years. To illustrate the point, ASFA referred to the
example of a 25 year old member in an industry fund, who might have $300,000 of
life insurance cover at a cost around $150 a year.
AFA and Mercer also suggested that inactive accounts might be at risk of
losing insurance, even in situations where a member has made a decision to
retain an inactive account in order to maintain insurance coverage. As AFA
This is a deliberate strategy, where the existing insurance
is better than the alternative. In this case, the member might top up the fund
from time to time to ensure that there [are] sufficient funds to pay the
insurance. It is possible that at the end of a 5 year period, where there have
been no further contributions, the balance has fallen to under $2,000. There is
a genuine risk that this legislation might lead to superannuation fund members
losing insurance that they intentionally held via an account that does not
receive regular contributions.
ASFA suggests that accounts with insurance should not be transferred to
the ATO. However, ASFA argued that if accounts are transferred, consideration
should be given to providing trustees with statutory protection so they are not
liable where members lose insurance coverage.
In its submission, Treasury noted that cancellation of insurance
coverage already occurs in a number of superannuation funds when account
balances fall below a certain threshold or when accounts are transferred to an
eligible rollover fund. Treasury also noted that individuals who are still
employed are likely to have another active account with insurance attached.
Transfer of 'unidentifiable'
As outlined in chapter two, the Bill reduces the period of inactivity
before accounts of unidentifiable members must be transferred to the ATO from
five years to 12 months. As is currently the case, for 'unidentifiable' members
the superannuation provider must be satisfied that it will never be possible
for the provider, having regard to information reasonably available to the
provider, to pay an amount to the member.
AFA contended in its submission that 'unidentifiable' accounts are more
likely to be returned to the member when held by the superannuation fund. On this
basis, it argued that it would be preferable to maintain the current
arrangement where the money remains with the superannuation fund for five
However, Treasury argued that if a super fund had determined that it
will never be possibly to identify a member after one year, then this is likely
to still be the case after five years.
Treasury also told the committee that there had been a great deal of
confusion regarding the distinction between the amendments affecting small
'lost member' accounts and the amendments affecting the treatment of
'unidentifiable' members. Treasury outlined the difference between these two
components for the committee:
For small lost accounts that are inactive for five years or
uncontactable, the threshold is being increased to $2,000, but there is no
decrease in the period of inactivity for inactive small accounts. That stays at
five years. Those small lost accounts represent the vast majority of accounts
covered by the measure. The second component of the measure was for
unidentifiable accounts. For that small proportion of accounts, the period of
inactivity is being decreased from five years to one year. As we have pointed
out in our submission—and it is also in the minister's press release of 29
October—those accounts represent less than 0.1 per cent of superannuation.
AIST made a similar point, noting that the meaning of 'unidentifiable'
accounts was often misunderstood. Moreover, in contrast to AFA, AIST told the
committee that 'funds really have no business hanging on to superannuation
contributions where they do not know and cannot find out who the rightful owner
of that superannuation is.' AIST further suggested that the one-year period for
transferring moneys from unidentifiable member accounts was appropriate.
The committee believes the amendments given effect by the Bill will be
of significant benefit to consumers. The amendments will help reunite people
with their unclaimed money sooner, and will protect the real value of that
money while it remains unclaimed.
Bank accounts, FHSAs and life
The committee acknowledges concerns expressed by a number of ADIs that
the reduction in the period of inactivity before accounts are treated as
unclaimed could potentially lead to moneys that are not genuinely unclaimed
being treated as such.
However, the committee also notes that the Bill provides for regulations
to be implemented which would exclude certain accounts and deposits for being
treated as unclaimed moneys, where it was considered necessary to do so. This
provides an appropriate measure of flexibility to address the concerns of
financial institutions and protect the interests of consumers as required. The
committee further notes that Treasury has been in regular contact with
representatives of the banking industry, and these industry representatives
have expressed satisfaction with Treasury's efforts to understand and address
The committee is confident that, on balance, owners of unclaimed moneys
will be better off as a result of the amendments. In particular, the amendments
will increase the likelihood of people being reunited with their money sooner,
and will protect that money from erosion through fees, charges and inflation
while it remains unclaimed.
The committee also acknowledges that some financial institutions are
concerned about the implementation timeframe for the amendments. However, the committee
is reassured by suggestions from the banking industry and Treasury that the
challenges of implementing the amendments in the timeframe envisaged in the
Bill are manageable, provided sufficient resources are allocated to the task.
The committee notes concerns expressed by the superannuation industry
that the increase in the threshold below which lost member accounts are
required to be transferred to the ATO could potentially result in the transfer
of active 'lost member' accounts, which would be inconsistent with the policy
intent of the Bill.
The committee is reassured by Treasury's advice that, in instances where
an active account holder is 'uncontactable,' the superannuation provider would
have a reasonably good line of inquiry to contact the member, particularly via
the employer who is making contributions for the account holder. The committee
also believes that the amendments will provide funds with a stronger incentive
to make this contact.
The committee believes there has been an unfortunate degree of
confusion between 'lost member' accounts (including 'uncontactable' members)
and 'unidentifiable' members, which has led some commentators to incorrectly
suggest that all unclaimed or inactive superannuation accounts must be
transferred to the ATO within 12 months under the proposed amendments. The committee
emphasises the point made by several parties during the inquiry, namely that only
that very small proportion of accounts where the provider is satisfied it will
never be possible for it to pay an amount to the member are considered
'unidentifiable' under the legislation.
The committee believes it is entirely appropriate that unidentifiable
member accounts are transferred to the ATO sooner rather than later.
The committee recommends that the Bill be passed.
Senator Doug Cameron
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