Date posted: 9/05/2018 5 min read

Low Income Super Balance Measures welcomed, but easier and cheaper solution available

CA ANZ welcomes Low Income Super Balance Measures in the Federal Budget, however increasing the minimum employer super threshold is a better solution

Chartered Accountants Australia and New Zealand (CA ANZ) says the Government has announced a range of commendable policy measures to help those with smaller super balances, including setting a maximum fee of 3% of the account balance.

As part of the Federal Budget papers, the Government also says it will consult on ways its current policy settings in this area could be improved “to better balance the priorities of retirement savings and insurance cover within super”.

“We commend the government for trying to fix this problem which has existed for over 25 years,” said Tony Negline, CA ANZ Superannuation Leader.

“Over the years many governments have made piecemeal changes in this area hoping that each announcement ‘will do the trick’, but none have dealt with the major issue.

“The changes announced in the Federal Budget reflect a serious attempt to address some of problems that arise with small super account balances.

“However the real cause of this problem needs to be addressed. In reality these small balance problems arise because the Super Guarantee threshold cuts in at too low a threshold.  It cuts in at only $450 of salary and wages each month.  For someone earning $15 per hour this represents only 30 hours of work.”

This $450 threshold has existed since compulsory super was introduced in 1992.

“As we have long advocated this threshold needs to be dramatically revised upwards,” Negline said.

“Many of these lower income earners will likely end up on the full age pension and pay more tax on their super investments than they pay in their own name.  So why do we penalise them in this way?

“We call on the Government to solve this problem at its source rather than try to solve it by increasing regulatory complexity.”


The three main measures, to come into effect from 1 July 2019, are:

  • Smaller super account balances (defined as $6,000 or less) will have a maximum fee of 3% of the account balance.  Negline said this will create administrative complexity for funds charging percentage, flat dollar fees and/or transaction based fees and implementation will be key.
  • A ban on all exit fees – some super funds will need to restructure how they handle an allowance for such transaction processing costs.
  • Insurance in super – currently members can be automatically signed up for insurance even if they don’t want it. This will move to an opt-in basis for super fund members that satisfy 1 of 3 criteria – aged under 25, have an account balance under $6,000 or not have had contributions for at least 13 months. Those impacted by this change will have 14 months to decide if they will opt-in or have their insurance automatically switched off.

In addition the Government will grant more powers the Australian Taxation Office to reunite smaller lost balances with active accounts.

Australian Federal Budget 2018-19

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