Ethics & Governance
Protecting Your Superannuation Package
BY ,  |  

Recently passed legislation, part of a package of reforms designed to 'protect Australians' superannuation savings from undue erosion by fees and insurance premiums', introduces a series of important changes that will create challenging implementation timeframes for funds and administrators in the coming months. This paper reports on the effects of the amendments, and what they mean for trustees of superannuation funds.


The Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 (the Bill) passed both Houses of Parliament on 18 February 2019, and is awaiting Royal Assent. The Bill formed part of the Federal Government's package of reforms of the same name, announced in the 2018-19 Budget.

While last-minute Senate amendments to the Bill did narrow its scope somewhat (including that the requirement to opt-into insurance will no longer automatically apply to under-25-year-old members and to accounts with balances below $6,000), the Bill nonetheless introduces a series of significant reforms.

Insurance for 'inactive' accounts to be provided on an opt-in basis only

What is it?

The Bill will amend the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) to insert a new section 68AAA, which prohibits trustees from providing automatic insurance coverage to members holding 'inactive' accounts (whether in a MySuper or choice account setting), unless the member positively elects to maintain the cover.

An 'inactive' account is defined for the purposes of the insurance opt-in rules as one in respect of which no contribution has been received (from any source) for a continuous period of 16 months (extended from 13 months under the original proposals, to accommodate longer planned absences from the workforce).

The Bill contains exemptions from the new prohibition for various groups of members, including defined benefit members, and for members whose employer-sponsor pays for their insurance. Rules also apply to ensure that insurance that has, in effect, been pre-paid continues in effect even where a member subsequently becomes 'inactive'.

Implications for superannuation trustees

The prohibition in s68AAA of the SIS Act commences on 1 July 2019. However, superannuation trustees have significant work to do before then.

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