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New Superannuation Laws – How they May Affect You

July 9, 2019

 

How will the new superannuation laws affect your death and disability insurance?

On 1 July 2019, the Federal Government’s Protecting Your Super Package Act comes into effect. This follows on from the banking Royal Commission which showed that many bank-owned super funds were deducting excessive fees from account balances, despite providing substandard services. The Package is designed to protect account holders from this happening again.

The Package has two main changes that may affect you. The first change is that members of choice super products and MySuper funds will lose their automatic death and disability insurance if their account is inactive (meaning no contribution was received) for more than 16 months.

The second change is that members with balances under $6,000 whose accounts have been inactive for more than 16 months will have their accounts paid to the Australian Tax Office (ATO), who will then try to transfer it to an active super fund in your name.

So, why are these changes important? You may not know that Australian workers are provided with automatic death and disability lump sum insurance through their default super funds, which are called MySuper accounts.

Automatic insurance in super, particularly total and permanent disability (TPD) insurance has been very successful in providing millions of Australians with cover when they would otherwise have none. At Maurice Blackburn, we have helped hundreds of union members access their TPD insurance entitlements through their super accounts when they have had to stop work due to illness or injury.

Want an example?

Garry injured his knee at work in October 2017. He has been receiving statutory workers compensation benefits since. His employer has not been required to pay his super because he hasn’t earned any wages. As at 1 July 2019, the new changes mean his TPD insurance will automatically cease.

If Garry can’t return to work, he can still make a claim for TPD insurance as part of his super as he became unable to work from October 2017 when he was still insured.

However if Garry returns to work on light duties, he probably won’t be eligible for new TPD cover for his knee injury – so if he ceases work again in the future, he won’t have a claim.

 

If you have suffered an injury or illness that has impacted your ability to work in any way, you ask your union rep for a referral to Maurice Blackburn Lawyers.

Free legal advice is a benefit of your union membership, so it won’t cost you anything to find out where you stand.

There are some very important things you need to be aware of:

  • If you lose cover due to the reforms, you will still be able to make a claim for your TPD or income protection entitlements as long as you had insurance cover when you became ill or injured
  • If you stop work due to illness or injury after 1 July 2019, you will be only eligible to claim your insurance if you have active cover on the date your stopped work
  • If you have an illness or medical condition, and you’re still working because you’re either soldiering on or waiting for your condition to stabilise before deciding whether to permanently stop working, you may lose your cover and you should check with your super fund as a matter of priority

You can avoid losing insurance cover by making sure you have at least $6,000 in your super account and by making at least one contribution per year. If either of these are not an option, you can also contact the fund directly and opt-in to default insurance cover.

Maurice Blackburn encourages union members who are unsure about their insurance needs to seek independent financial advice about what cover is right for you.

We can refer you to a reputable financial adviser if you don’t have one.

This News Story has been written and provided by AWU Partners Maurice Blackburn Lawyers to inform members.

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