The Protecting Your Superannuation Package Bill passed through the Senate last night, after a range of amendments took out several of the proposed insurance changes contained within the original Bill.
Adam Gee, KPMG Partner, Superannuation Advisory, said: “The proposed changes now appear to strike a more reasonable balance for the industry. KPMG’s analysis last year, post the Federal Budget announcements, identified that there were numerous unintended consequences emanating from the removal of cover for a broad range of members (such as those aged under 25 and with balances under $6,000). In our view, limiting the removal of cover to inactive accounts will better target the core issue.”
But Gee noted that the implementation timeframe of 1 July 2019 for the changes is likely to be practically unworkable, given the requirement for funds to communicate material changes to members at least 90 days before the change occurs.
Gee said: “It is critical that the Government provides a reasonable timeframe for funds to implement the changes to ensure affected members are fully aware of the impact on their arrangements”.
KPMG also warned that the other changes within the Bill, surrounding the automatic transfer of small accounts to the ATO and the capping of fees for small accounts, are likely to place significant pressure on fund sustainability, given the impact that these changes will have on revenue models, particularly for those funds with large inactive and small account membership bases.
Gee said: “Unless funds are able to find material administration cost savings or other operational efficiencies, fees for remaining members could increase longer term as a result”.
The amendments agreed in Senate last night must now go to the House of Representatives before the legislation is passed.