INACTIVE ACCOUNTS – KNOW YOUR RIGHTS!


Recent changes mean that the Government is now more easily able to claim money you have lying in inactive bank & superannuation accounts.  What are the new rules, and how can you get your money back?
BANK ACCOUNTS
New Rules
In April 2013, legislation was passed through Parliament which will allow the Federal Government to more easily claim money kept by individuals in inactive bank accounts.
From 31 May 2013, the Government will be able to transfer all money from bank accounts that have not been used for three years into their own Commonwealth general revenues.  This means that accounts containing anything from $1.00 that have not had any deposits or withdrawals in the past three years will be transferred to the Government to sit with the Australian Securities and Investments Commission (ASIC).  This represents a significant change from the previous law where bank accounts had to remain inactive for up to 7 years before the money was transferred to ASIC.
 
Claiming Back
As has always been the case, if you are affected by this reform & have your money transferred to ASIC, you are able to claim it back.  However, the important point to note is that the process of claiming your money back is quite protracted.  By significantly lowering the threshold (from 7 years to 3 years), the Government will be subjecting many more people to what at times can be a frustrating, drawn-out process which involves: 
1.   Searching ASIC website – go to www.moneysmart.gov.au & use the ‘Unclaimed Money Search’ tool.
2.   Approach your financial institution – if your name appears on the ‘Unclaimed Money Search’ tool, rather than being able to claim the money straight back from ASIC, you instead need to approach your financial institution as they are responsible for assessing the rightful owner of the funds.
3.   ASIC payment – if you manage to prove to your financial institution that the funds are yours, they will in turn notify ASIC.  ASIC will then, after a period of time, release the funds back to your financial institution who will then pay you the amount.
 
Australian Bankers Association Chief Executive, Steve Munchenberg, says that there is no benefit for consumers from the changes – only downside.  He warns that consumers potentially face "months of delays" in trying to get their money back from ASIC (assuming that they can first satisfy their financial institution that they are the rightful owners).
 
Take Home Message
There are many reasons why a bank account may have been inactive for the past three years including:
  • You may have changed banks & not transferred all your accounts & money over;
  • You may have set up an account for your child’s education;
  • You may have set up a separate account for a "rainy day"; or
  • You may have gone overseas to live or travel for an extended period.
If you fall into one of these categories & your account has been inactive for three years or more, be sure to make a deposit or withdrawal from your account before 31 May.  Failure to do so may mean you expose yourself to what can be a protracted & frustrating process of claiming your money back first from your institution, and then from ASIC.
 
SUPERANNUATION ACCOUNTS
In its Mid-Year Economic & Fiscal Outlook (MYEFO) late last year, the Government announced that effective 31 December 2012, "lost" superannuation accounts of less than $2,000 (up from the previous $200) will be transferred to the Tax Office after 12 months of inactivity (down from the previous five years of inactivity).  Under the old law, it was estimated 45% of Australians had "lost" superannuation (i.e. accounts that have been inactive for five years or more).  This figure is now expected to have increased significantly given the reduction from five years of inactivity to just 12 months of inactivity.
 
If you have an account that has been inactive for at least 12 months or more & contains less than $2,000, it is now likely sitting with the Tax Office.  The good news is that it is much easier to locate your lost superannuation & claim it back from the Tax Office than money from inactive bank accounts.  To claim it back you can just apply directly to the Tax Office.  To find out whether you have any "lost" superannuation, go to the Tax Office website www.ato.gov.au & type ‘superseeker’ into the search box at the top of the page.  With less than 5% of people aware that they have lost superannuation, it’s well worth conducting a search.
 
TIP
If you discover that you have lost superannuation, or even if your superannuation is not lost but you have several superannuation accounts, it pays over the long term to roll your money into one superannuation account.  Doing so means that it is not only easier to monitor your savings balance & plan for your retirement, but one account means just one set of administration fees & charges, rather than multiple accounts all attracting fees & charges.  You should, however, seek advice first as there may be income insurance consequences.