9
November 2012 i
Table
of Contents
OVERVIEW
..............................................................................................................................
1
PART
A
- BANKING,
FHSAS
AND LIFE
INSURANCE
(SCHEDULE
1,
2 & 3)................................ 2
Current
arrangements
...............................................................................................................................
2
Amendments
under the Bill
.......................................................................................................................3
Impact
on depositors and beneficiaries
....................................................................................................
3
Impact
on financial institutions
...................................................................................................................6
Other
issues
...................................................................................................................................................
6
PART
B
- SUPERANNUATION
(SCHEDULE
4)
...............................................................................
7
Protecting
small balances from erosion by fees and charges
..................................................................7
Uncontactable
members
...............................................................................................................................8
Unidentifiable
members
...............................................................................................................................9
Strategies
to reunite members with lost super accounts
.........................................................................9
ATO
activities to reduce number of accounts which become lost
........................................................10
Proactive
payment of unclaimed superannuation under $200
.............................................................11
PART
C
- CORPORATIONS
(SCHEDULE
5)
..................................................................................11
Current
operation of the corporations unclaimed money regime
........................................................11
Classification
of money and property as ‘unclaimed’ under the corporations
legislation ...............12
Treatment
of company unclaimed moneys under the Bill
.....................................................................
12
PART
D
- PAYMENT
OF INTEREST ON UNCLAIMED MONEYS
.........................................................12
PART
E
- TIMING
....................................................................................................................
13
CONCLUSION
.......................................................................................................................
14
OVERVIEW
The
Government announced the unclaimed moneys measures in the 2012-13
Mid-Year Economic and Fiscal Outlook.
The Bill makes amendments to the Banking
Act 1959
(Banking
Act),
First
Home Saver Accounts Act 2008
(FHSAs
Act),
Life
Insurance Act 1995
(LI
Act),
Superannuation
(Unclaimed Money and Lost Members) Act 1999
(SUMLM
Act),
Australian
Securities and Investments Commission Act 2001
(ASIC
Act),
and
Corporations
Act 2001
(Corporations
Act) to give effect to the unclaimed moneys measures.
Schedule
1, 2 and 3 amend the Banking Act, FHSAs Act and LI Act to reduce the
period of inactivity before a bank account or life insurance policy
is required to be transferred to ASIC from seven years to three
years, effective from 31 December 2012.
(Please see Part
A).
Schedule
4 amends the SUMLM Act in relation to two classes of unclaimed
moneys. One class of unclaimed superannuation moneys relates to
‘uncontactable’ members and accounts which have been inactive for
five years, while the other relates to ‘unidentifiable’ members.
The amendments increase the account balance threshold below which
lost accounts are required to be transferred to the Australian
Taxation Office (ATO) from $200 to $2,000, effective from 31 December
2012. A ‘lost account’ is one where the member is uncontactable,
or the account has been inactive for a period of five years. Separate
to the first change, the amendments also reduce the period of
inactivity before an account of an ‘unidentifiable’ member is
required to be transferred to the ATO from five years to 12 months,
effective from 31 December 2012.
(Please see Part
B).
Schedule
5 amends the Corporations Act and ASIC Act to
streamline arrangements for the administration and distribution of
unclaimed property and funds that arise under the Corporations Act,
including closing the Companies and Unclaimed Moneys Special Account
(CUMSA). (Please see Part
C).
The
Bill will also for the first time enable the payment of interest when
these unclaimed superannuation, bank account, life insurance and
company monies are reclaimed, from 1 July 2013, to maintain their
real value over time. The
Government intends to introduce legislation in early 2013 to exempt
this Consumer Price Index (CPI) interest from tax.
(Please see Part
D).
In short, the Bill will bring forward the time at which money is
recognised under the relevant laws as lost or unclaimed. By bringing
forward the time when details are published in publicly searchable
databases, the Bill will help to reunite people with their money
sooner. It will also help to protect these superannuation, bank
account, life insurance and company moneys from erosion by inflation
and fees and charges.
PART
A-BANKING,FHSAS
AND LIFE
INSURANCE
(SCHEDULE
1,2&3)
Schedule
1, 2 and 3 of
the Bill amend the Banking Act, FHSAs Act and LI Act.
The
changes reduce the period of inactivity before bank accounts and life
insurance moneys are treated as unclaimed from seven years to three,
and pay interest equivalent to CPI inflation on unclaimed moneys from
1 July 2013.
Current
arrangements
Authorised
deposit-taking institutions (ADIs) are required to transfer accounts
to ASIC where there has not been a deposit or withdrawal other than
bank fees and interest for seven years1.
For FHSAs, if there has not been a contribution or payment for seven
years, they are required to be transferred to ASIC. There is a
similar requirement for life insurers except that the seven year
period is from when an amount becomes payable, such as when a policy
matures2.
1
In the case of bank accounts, there is also a $500 threshold in
recognition of the costs to an ADI and the government associated with
processing the transfer of small amounts. This threshold, which is
set via regulation, was last determined in 1993, when many banks and
government were still using paper based systems.
2
Life insurers have advised that the majority of unclaimed life
insurance moneys relate to legacy insurance products and premium
refunds.
To
help reunite people with their unclaimed moneys, details of all
unclaimed bank accounts and life insurance amounts are published on
the ASIC website. People can reclaim these bank accounts and life
insurance amounts at any time. However, currently no form of interest
is paid when they are reclaimed.
ASIC
performs a range of activities to reunite unclaimed moneys with their
owners. In particular, it:
•
maintains
the unclaimed moneys database;
•
publishes
annually the Gazette containing the bank and life insurance unclaimed
moneys provided to ASIC for that year;
•
makes
available the records for an online search through the MoneySmart
website, including maintaining the search facility;
•
has
people available as part of ASIC’s client contact centre to answer
calls from the public about unclaimed money and searching for
unclaimed money;
•
runs
a yearly promotion, including appearances on shows such as Sunrise on
Channel 7, to promote people using the online search facility;
•
where
resourcing permits, seeks to locate persons with large amounts of
bank unclaimed money owed to them and inform them of the ability to
make a claim;
•
promotes
the online search facility when it attends exhibitions; and
• limitedly
uses Twitter to let people know about unclaimed banking and life
insurance moneys.
Amendments
under the Bill
Under
the amendments, the period of inactivity before bank accounts and
life insurance policies are transferred to ASIC will be shortened
from seven years to three years. In addition, interest will be paid
at a rate equivalent to CPI inflation from 1 July 2013.
These
changes will allow the earlier identification of lost bank accounts
and life insurance amounts, thus enabling the details of these
amounts to be published (and available to be searched) sooner.
Impact
on depositors and beneficiaries
Reducing
the period of inactivity before bank accounts and life insurance
policies are transferred to ASIC will help reunite people with their
unclaimed money sooner. An account owner (or their descendants) has
no easy way of searching for old accounts until the account is
transferred to ASIC and entered into ASIC’s online database as
unclaimed money. Once an unclaimed account is transferred to ASIC,
people can easily search for it online at ASIC’s website and can
reclaim it at any time by contacting the relevant ADI, FHSA provider
or life insurer. This includes descendants of the individual, in the
unfortunate cases where the individual has passed away3.
3
Anecdotal reports suggest that relatives may search the unclaimed
moneys register soon after a person dies. However, if the deceased
person was using their account, it will currently not be recognised
as unclaimed and listed in the ASIC database until at least seven
years after their death.
Furthermore,
current claims data for the existing unclaimed bank accounts scheme
shows that it becomes increasingly unlikely that lost moneys will be
reunited with their owners, the longer it has been since the last
transaction on the account. Therefore, listing unclaimed amounts
after three years should reduce the proportion of unclaimed moneys
which are never reunited with their owners.
In
addition, to ensure these unclaimed moneys maintain their real value
over time, the Government will pay interest on these unclaimed bank
accounts and life insurance policies at the rate of CPI inflation,
and will make this interest payment tax exempt. This will maintain
the real value of unclaimed moneys for the benefit of the owners of
these moneys. Currently, no interest is payable and the compounding
effects of inflation can significantly erode the value of unclaimed
bank accounts and life insurance moneys.
The
following examples, taken from ASIC’s online database, illustrate
the impact of inflation.
• Last
year a person reclaimed a bank account of $113 that was transferred
as unclaimed money in 1973, after being inactive since 1966. If
interest had been paid at the rate of CPI inflation since 1973, the
owner would have received $935. Instead, because no form of interest
is currently paid, the owner only received $113 when it was reclaimed
– a loss of $882 in 2011 dollars.
• Mr
Kenny from Cremorne had his $4,779 Commonwealth Bank account
transferred as unclaimed money in 1971, after being inactive since
1964. If interest had been paid at the rate of CPI inflation since
1971, he (or a descendent) would receive $46,892 if he reclaimed the
money today. Instead, because no form of interest is currently paid,
if he (or a descendent) were to claim the money today, he would only
receive $4,779 – a loss of $42,113 in today’s dollars.
• Ms
Hill from Glebe had her $947 Commonwealth Bank account transferred as
unclaimed money in 1977, after being inactive since 1970. If interest
had been paid at the rate of CPI inflation since 1977, she (or a
descendant) would receive $4,749 if she reclaimed the money today.
Instead, because no form of interest is currently paid, if she (or a
descendent) were to claim the money today, she would only receive
$947 – a loss of $3,802 in today’s dollars.
• JS
Douglas had his $402 NAB account transferred as unclaimed money in
1990, after being inactive since 1983. If interest had been paid at
the rate of CPI inflation since 1990, he (or a descendent) would
receive $712 if he reclaimed the money today. Instead, because no
form of interest is currently paid, if he (or a descendent) were to
claim the money today, he would only receive $402 – a loss of $310
in today’s dollars.
• Henry
Baulch of Stony Crossing had his $776 AMP Life Limited insurance
policy transferred as unclaimed money in 1953, after being inactive
since 1946. If interest had been paid at the rate of CPI inflation
since 1953, he (or a descendent) would receive $12,343 if he
reclaimed the money today. Instead, because no form of interest is
currently paid, if he (or a descendent) were to claim the money
today, he would only receive $776 – a loss of $11,567 in today’s
dollars.
Shortening
the period of inactivity before bank accounts and life insurance
policies are transferred to ASIC also helps to protect the real value
of lost amounts for their owners.
The
low balances in most unclaimed bank accounts suggest that many of
these accounts are likely to be transaction accounts4.
A survey by Treasury of the four major banks found that interest
rates on their transaction accounts currently range from nothing to
0.01 per cent. In addition, life insurers do not provide interest on
insurance policies.
4
Of the bank account balances transferred to ASIC in the most recent
(2011) returns, half were less than $1275.
For
example, if inflation were to average 2.5 per cent, the extra four
years before these inactive amounts are transferred to ASIC would
allow their real value to be eroded by more than 10 per cent (four
years x 2.5 per cent). For the median unclaimed bank account
transferred in 2011 of $1,200, this means a value loss of more than
$120.
The
real life examples above show how much of a difference four years can
make where a bank account or life insurance policy is earning no
interest.
•
The
owner of the $113 bank account that was reclaimed last year after
being inactive since 1966, would have received $935 if interest had
been paid at the rate of CPI inflation since 1973, when it was
transferred as unclaimed moneys. This would have increased further to
$1,074 if the account had been transferred after three years instead
of seven.
•
If
Mr Kenny from Cremorne (or a descendant) today reclaimed his $4,779
Commonwealth Bank account that became inactive in 1964, they would
have received $46,892 if interest had been paid at the rate of CPI
inflation since 1971. This would have increased further to $54,510 if
the account had been transferred after three years instead of seven.
•
If
Ms Hill from Glebe (or a descendant) today reclaimed her $947
Commonwealth Bank account that became inactive in 1970, they would
have received $4,749 if interest had been paid at the rate of CPI
inflation since 1977. This would have increased further to $8,033 if
the account had been transferred after three years instead of seven.
•
If
JS Douglas (or a descendant) today reclaimed his $402 NAB account
that became inactive in 1983, they would have received $712 if
interest had been paid at the rate of CPI inflation since 1990. This
would have increased further to $956 if the account had been
transferred after three years instead of seven.
•
If
Henry Baulch (or a descendent) today reclaimed his $776 AMP Life
Limited insurance policy that became inactive in 1946, they would
have received $12,343 if interest had been paid at the rate of CPI
inflation since 1953. This would have increased further to $19,627 if
the account had been transferred after three years instead of seven.
Even
if unclaimed bank accounts are earning interest, this interest is
likely to be insufficient to keep up with inflation in many cases,
and is normally subject to tax. Even though interest rates on savings
accounts can be higher, quoted rates often include time limited
special offers that may only last for a few months before reverting
to a lower rate.
Another
factor that can significantly erode bank accounts the longer they are
left untouched before becoming unclaimed moneys is fees. Many bank
accounts have fees of between $2 and $6 per month.
Although
some accounts provide higher interest or fee waivers if certain
amounts are deposited each month, unclaimed bank accounts will not
qualify because, by definition, they have not had any recent deposits
or withdrawals. Treasury reviewed terms and conditions of some bank
accounts. For example:
•
Commonwealth
Bank’s GoalSaver account offers 4.90 per cent interest. However,
this drops to just 1.25 per cent if there is not a deposit of at
least $200 each month. An unclaimed
account will, by definition not qualify. Further, any interest earned
would be taxable.
• A
standard Westpac Choice account has no monthly fees, but only if at
least $2,000 is deposited each month, otherwise there is a $5/month
monthly service fee. Therefore an inactive account would lose an
extra $240 in monthly fees if left in the bank for seven years
instead of three years. In contrast, if unclaimed moneys are
transferred to ASIC after three years, they will be listed on ASIC’s
online database, making it easier for their owners to find them, and
they will be protected from inflation and bank fees sooner. Once
the owner of an unclaimed bank account finds the account using ASIC’s
online search facility, all they need to do to reclaim their account
is to approach the relevant financial institution. The ADI will then
assess whether the claimant is the rightful owner of the account and
notify ASIC. ASIC will then release the funds to the ADI. The process
for unclaimed life insurance moneys is the same, except that the
claimant must approach the relevant life insurer.
Impact
on financial institutions
ADIs
and life insurers already have systems in place to identify and
transfer unclaimed moneys to ASIC based on the current definition of
seven years of inactivity. The amendments will simply change the
relevant time period from seven years to three years.
The
Bill also contains transitional provisions that extend the date by
which ADIs and life insurers must report on and transfer unclaimed
moneys to ASIC next year by one month, from 31 March 2013 to 30 April
2013.
Other
issues
Although
the legislation governing FHSAs and Farm Management Deposits require
providers (for example, ADIs) to make reasonable efforts to contact
account owners, the current definition of an unclaimed bank account
is longstanding and has never included a requirement for ADIs to
attempt to contact customers. However, in practice, the majority of
ADIs seek to contact customers whose accounts are at risk of becoming
unclaimed moneys through letters, phone calls, and messages on
monthly statements.
The
unclaimed moneys provisions have existed for many decades and have
never contained an exclusion for large accounts. This Bill does not
change that. Where a large account balance has been lost due to the
death of its owner it is extremely unlikely that the owner would have
wished to bequeath their account to their bank, which would be the
practical effect of imposing a size limit on which account balances
may be treated as unclaimed moneys. Furthermore, the real value of
large accounts is just as likely to be eroded by inflation as smaller
account balances.
PART
B-SUPERANNUATION
(SCHEDULE
4)
Schedule
4 of
the Bill amends the SUMLM Act to make a number of changes.
First,
it will increase the account balance threshold below which lost
accounts are required to be transferred to the ATO from $200 to
$2,000, effective from 31 December 2012. A ‘lost account’ is one
where the member is ‘uncontactable’, or the account has been
inactive (no contribution or rollover) for a period of five years. A
member is ‘uncontactable’ if and only if the super fund has never
had an address for the member, or sent two written communications
(or, if the provider chooses, one written communication) to the
member’s last known address and they were returned unclaimed. The
definition of a ‘lost member’ excludes amounts supporting defined
benefit interests, amounts held in self managed superannuation funds,
or where the member has indicated that he or she wishes to continue
to be a member of the fund.
Second,
schedule 4 will reduce the period of inactivity before an account of
an ‘unidentifiable’ member is required to be transferred to the
ATO from five years to 12 months, effective from 31 December 2012. A
member is ‘unidentifiable’ if the super fund is satisfied, based
on the information reasonably available to the fund, that it will
never be possible to pay an amount to that member. These amounts
represent less than 0.1 per cent of superannuation.
Third,
schedule 4 will provide for the payment of interest on superannuation
accounts that are reclaimed from the ATO, accruing and payable from 1
July 2013. See Payment
of interest on unclaimed moneys below
for further information on interest.
Protecting small
balances from erosion by fees and charges
Accounts
with small balances held in superannuation funds are often eroded
over time by fees, charges and insurance premiums.
Rice
Warner5
estimate
that the overall fees for the whole superannuation industry,
expressed as a percentage of assets, averaged 1.20 per cent for the
year to 30 June 2011. Fees for small lost accounts can, however, be
considerably higher than the industry average.
5
The Financial Services Council released the report ‘Superannuation
Fees Research – June 2012’ which was prepared for it by Rice
Warner Actuaries. The report is largely based on APRA data,
supplemented by Rice Warner’s own analysis.
The
Rice Warner analysis shows that fees for accounts with a low balance
(i.e. $5,000) can be as much as three times the industry average (for
example, 3.94 per cent for the small corporate master trust segment,
2.26 per cent for industry funds and 2.4 per cent for eligible
rollover funds with balances of $5,000). T
The
Treasury has undertaken an analysis of the impact that typical fees
and charges can have on low super account balances. This analysis
indicates that the return after the deduction of fees and insurance
for balances of up to $2,000 is typically negative.
For
example, an account in a typical fund with a balance of $2,000 at the
beginning of the year will have reduced by around $135 for a
30-year-old to $1,865 in a year’s time after fees and insurance
premiums.
In
cases where insurance benefits are still attached to lost super
accounts, the insurance policy will not continue on transfer to the
ATO, including existing lost super amounts transferred to the ATO.
Cancellation already occurs within a number of funds when account
balances fall below a given threshold or when accounts are
transferred to an eligible rollover fund. It should be noted that
individuals still engaged in the workforce, are likely to have
another active account with insurance still attached.
The
Treasury estimates that over a five-year period, protecting an
account from fees and paying interest at a rate equivalent to CPI
inflation could make a 20-year-old who currently has $1,000 inactive
in super over $700 better off, and a 30-year-old who currently has
$2,000 inactive in super over $1,000 better off.
The
Treasury analysis is based on the ChantWest 10-year average net rate
of return for balanced funds, average administration fees and default
insurance across an indicative sample of industry and retail funds.
Uncontactable
members
The
ATO provides guidance on when a member is considered ‘uncontactable’
in their ‘Lost members register – protocol document’. The
non-response by a member to mail or an email that requests an action
does not equate to ‘returned unclaimed’ mail. The regulations
state that a member is considered ‘uncontactable’ if, and only
if, two pieces of written communication sent to the member’s last
known address are returned unclaimed. However, the regulations also
give the super provider the option to act upon one written
communication sent to the member’s last known address and returned
unclaimed.
Under
the Superannuation
Industry (Supervision) Act 1993,
trustees must “exercise, in relation to all matters affecting the
entity, the same degree of care, skill and diligence as an ordinary
prudent person would exercise in dealing with property of another for
whom the person felt morally bound to provide”.
As
a result, a fund must make a reasonable effort when trying to locate
an uncontactable member. What is considered reasonable involves an
element of judgment, and it depends upon the facts of the case and
the environment in which the issue is being examined. Examples of
follow-up action to make contact with a member if they are considered
lost could include the following (in addition to mail outs):
•
checking
the super provider’s own data to see if the member has other
accounts with more current information;
• contacting
an employer in cases where the employer is contributing to the
account; and
• engaging
a company like Australia Post to undertake database searches to
locate the member.
In
these circumstances, the super provider would utilise the return of
unclaimed mail as a trigger to undertake additional thorough searches
to locate the member.
The
ATO’s protocol document however, does not expect super providers to
pursue information or activities at all costs, but to base their
efforts on what would normally be required in the circumstances,
having regard to the environment.
Unidentifiable
members
The
second much smaller component of the superannuation changes relates
to accounts of ‘unidentifiable’ members. Only for these accounts,
will amounts be transferred to the ATO after 12 months of inactivity
rather than five years as is currently the case. These amounts
represent less than 0.1 per cent of superannuation.
Accounts
of ‘unidentifiable’ members are also known as ‘insoluble lost
member accounts’. These are accounts where the super fund is
satisfied, based on the information reasonably available to the fund,
that it will never be possible to pay an amount to that member. This
would be satisfied if, for example, the super fund was missing both
the member’s full name and tax file number.
Reducing
the period of time that a super fund can hold these accounts will
encourage super funds to make further inquiries to discover who the
owner of the account is, during the period when contributions are
being made.
A
number of individuals have incorrectly stated that all super accounts
that have been inactive for 12 months will be transferred to the ATO.
This is false. Only the tiny proportion of accounts where the member
is ‘unidentifiable’ will be transferred to the ATO after 12
months of inactivity rather than five years as is currently the case.
Strategies
to reunite members with lost super accounts
The
ATO has a number of strategies in place to help reunite members with
lost super accounts, aiming to reduce the number of unnecessary and
inactive accounts. The success of these ATO programs has helped
reunite over 1 million people with around $5.5 billion in lost
superannuation. For the first time, the value of lost and unclaimed
superannuation decreased in 2011-12, from $20.9 billion as at 30 June
2011 to $17.7 billion as at 30 June 2012.
Individuals
are able to claim back monies from the Commissioner at any time. In
most cases super monies will need to be transferred into an account
nominated by the member, however
the monies can be paid directly to the member where a condition of
release has been met (for example, the person is over 65 or the
balance is less than $200).
The
ATO has various strategies in place to reunite people with super
amounts transferred to them. All of the strategies described below
are underpinned by ATO data matching work to identify the tax file
number (TFN) and new address of members. The ATO can access its data
holdings across a range of tax and superannuation systems and third
party data. Once successfully matched to the owner of a TFN, these
accounts can then be displayed on the ATO’s free online service,
SuperSeeker.
The
ATO strongly promotes the SuperSeeker service in the media and
through other outlets to encourage individuals to search for lost
super. SuperSeeker continues to be one of the ATO’s highest
utilised online services. During the 2011-12 financial year, there
were 1.37 million SuperSeeker searches undertaken.
Members
can use SuperSeeker to locate active superannuation accounts, lost
superannuation accounts, and superannuation monies held by the ATO.
Currently, SuperSeeker can help you lodge a request with your fund
online if you wish to transfer your super to another super account.
In addition to the online service, members can also use the
SuperSeeker service by phoning the ATO and either asking ATO staff to
conduct the search on their behalf, or using the interactive voice
response service.
Where
ATO held superannuation is located, members can complete a
portability form or claim form to initiate a rollover to their
current fund, and in certain circumstances withdraw the funds. From
2014, members will be able to complete an electronic claim form to
rollover or claim these amounts.
The
ATO also provides super funds with a search facility to allow them to
check, with member consent, for any ATO held monies. Funds are
required to notify the member of the results of these searches and to
seek the consent of members to arrange rollover into a super account
nominated by the member.
The
Government will consult further on additional ways to facilitate the
process of reuniting members with their lost accounts.
ATO
activities to reduce number of accounts which become lost
The
ATO has worked to reduce the number of accounts and members which
become uncontactable. The ATO has manually matched lost
superannuation accounts and notified members of their lost
superannuation through letters and phone calls. The letters and phone
calls encourage taxpayers to get in touch with their fund and update
their details, or to consider consolidating their accounts. As part
of the letter campaign, the ATO also provides portability forms to
members to encourage them to consolidate their accounts. If the
member wishes to consolidate, they may do so by using SuperSeeker,
completing the portability form, or contacting their active fund to
begin the process.
The
ATO also provides current address information to funds, allowing them
to re-establish contact with their members. During the 2011-12 year,
the ATO provided around 1.4 million addresses to funds, helping them
reunite over 1 million people with approximately $5.5 billion in lost
superannuation.
Proactive
payment of unclaimed superannuation under $200
The
ATO has also commenced making proactive payments of unclaimed super
balances under $200. The ATO has access to data arising from direct
lodgement of information by individuals and third party data
providers, which allows it to obtain updated addresses. When an
account is successfully matched, a cheque is automatically issued to
the member, without the need for a claim form to be lodged. Since its
commencement in June 2012, the ATO has issued nearly 153,000 cheques
worth $11.6 million.
PART
C-CORPORATIONS
(SCHEDULE
5)
Schedule
5 of
the Bill amends the current regime that applies to unclaimed moneys
that arise under the Corporations Act, and closes the Companies and
Unclaimed Moneys Special Account (CUMSA) established under the ASIC
Act.
The
amendments also provide for the payment of interest on these
unclaimed moneys, accruing and payable from 1 July 2013. See Payment
of interest on unclaimed moneys below
for further information on interest.
Current operation
of the corporations unclaimed money regime
CUMSA
is a longstanding feature of the corporations legislation. It
pre-dates the current legislative and regulatory regime that is
established under Commonwealth legislation, specifically the
Corporations Act supported by referrals of power by the States.
Currently, once company money is classified as ‘unclaimed’ (or
results from the sale of property which is classified as unclaimed),
it is credited to CUMSA. If an amount is not reclaimed from CUMSA
within six years after it was originally credited to CUMSA, the
amount is debited from CUMSA and transferred to ASIC. ASIC must pay
the claimant their money if satisfied they are entitled to the
amount, either out of CUMSA or out of money appropriated by
Parliament for that purpose if it has already been debited from
CUMSA.
At
present, the ASIC Act provides that CUMSA is also to be credited with
interest received by ASIC from the investment of the CUMSA balance.
Interest accrued on the balance in CUMSA may be used to fund
proposals determined by the Minister to reduce business costs and
improve regulation. There is currently no scope to pay that interest
to the owners of the unclaimed moneys.
Classification
of money and property as ‘unclaimed’ under the corporations
legislation
Unclaimed
company moneys can arise in a number of ways under the Corporations
Act. The Bill does not change the current law relating to when
company money or property is classified as being ’unclaimed’, or
the time periods that currently determine when moneys become
‘unclaimed’ under the Corporations Act.
Examples
of unclaimed moneys under the Corporations Act include:
•
moneys
arising after a compulsory acquisition of securities, where the
person cannot be found for 12 months;
•
where
a company cannot contact a shareholder for more than six years; or
•
where
there is money that is the property of a deregistered company, or
unclaimed money after the liquidation of a company.
The
existing provisions of the Corporations Act set out the processes to
be followed in relation to the money or property (where relevant),
and are not changed by this Bill.
Treatment
of company unclaimed moneys under the Bill
As
a result of the closure of CUMSA, once money is classified as
‘unclaimed’ under the Corporations Act, it will be immediately
transferred to ASIC, rather being credited to CUMSA. The amendments
in Schedule 5 do not affect peoples’ entitlement to receive their
unclaimed money. Claimants of unclaimed money will continue to be
able to follow the existing procedure to reclaim their money (for
example, through ASIC’s MoneySmart website). Payments to claimants
will be made out of money appropriated by Parliament for that
purpose. For the first time, interest will also be paid on these
unclaimed moneys, at the rate of CPI inflation.
PART
D-PAYMENT
OF INTEREST ON UNCLAIMED MONEYS
At
present, no interest is payable on amounts that are classified as
‘unclaimed’ under the relevant provisions of the Banking Act, the
FHSAs Act, the LI Act, the SUMLM Act and the Corporations Act. As a
result, previously unclaimed amounts that are repaid to claimants
(should they reclaim their money) are not indexed to take account of
the time that has elapsed since the money was classified as
‘unclaimed’.
The
Bill provides that owners of unclaimed money will be entitled to a
payment of interest on that money, which will be calculated according
to the regulations. The interest accrues, and is
payable, from 1 July 2013. The regulations may prescribe different
rates for different periods over which interest accrues.
The
Government has announced that interest will be paid at the rate of
CPI inflation. The Government also intends to introduce legislation
in early 2013 to exempt the interest from tax.
In
each of the acts concerned, the interest is paid by the same entity
or authority that pays the unclaimed money to a claimant,
specifically:
•
the
ADI, under the Banking Act;
•
the
FHSA provider, under the FHSAs Act;
•
the
Treasurer, under the LI Act;
•
the
Commissioner, under the SUMLM Act; and
•
ASIC,
under the Corporations Act.
PART
E-TIMING
ADIs
and life insurers are required by the Banking Act, FHSAs Act and LI
Act to assess unclaimed amounts as at 31 December and submit those
amounts to ASIC by 31 March of the following year. The Bill contains
transitional provisions that extend the date by which ADIs and life
insurers must report on and transfer unclaimed moneys to ASIC next
year by one month to 30 April 2013. Typically, however, ADIs and life
insurers start making payments in January.
Superannuation
funds are required by the SUMLM Act to assess unclaimed amounts as at
31 December and 30 June, and submit those amounts to the ATO by 30
April and 31 October respectively.
The
Government has indicated that the amendments are intended to take
effect from 31 December 2012. However many ADIs, life insurers and
superannuation funds are reluctant to make changes to their unclaimed
money systems until the Bill has passed the Parliament. Failure to
pass the Bill this year will therefore create considerable
uncertainty for these organisations, and result in increased
inconvenience and likely higher implementation costs for many
organisations in early 2013.
As
discussed in the sections above, these amendments will provide
benefits worth many millions of dollars to the owners and
beneficiaries of lost accounts, by protecting them from erosion by
inflation and fees, and helping to reunite them with their owners
sooner. These benefits will be put at risk if the Bill does not pass
the Parliament by the end of this year, given it would result in
organisations not making the system changes required to implement the
amendments.
CONCLUSION
The
Bill will improve the current arrangements for unclaimed bank
accounts, life insurance policies, superannuation accounts and
company moneys, to help reunite these lost accounts with their owners
sooner, and prevent them from being eroded by inflation and fees. The
changes include paying interest on unclaimed moneys for the first
time, to ensure they maintain their real value over time. This
interest will be paid at the rate of CPI inflation and will be tax
free.
ETHICAL DONATORS AND COMMUNITY MEMBERS REQUIRED, TO FILL THIS SPACE WITH YOUR POLITICAL SLOGANS, ADVERTISING OFFERS, WEBSITE DETAILS, CHARITY REQUESTS, LECTURE OPPORTUNITIES, EDUCATIONAL WORKSHOPS, SPIRITUAL AND/OR HEALTH ENLIGHTENMENT COURSES. AS AN IMPORTANT MEMBER OF THE GLOBAL INDEPENDENT MEDIA COMMUNITY, MIKIVERSE POLITICS HONOURABLY REQUESTS YOUR HELP TO KEEP YOUR NEWS, DIVERSE,AND FREE OF CORPORATE, GOVERNMENT SPIN AND CONTROL. FOR MORE INFO ON HOW YOU MAY ASSIST, PLEASE CONTACT:themikiverse@gmail.com
ETHICAL DONATORS AND COMMUNITY MEMBERS REQUIRED, TO FILL THIS SPACE WITH YOUR POLITICAL SLOGANS, ADVERTISING OFFERS, WEBSITE DETAILS, CHARITY REQUESTS, LECTURE OPPORTUNITIES, EDUCATIONAL WORKSHOPS, SPIRITUAL AND/OR HEALTH ENLIGHTENMENT COURSES. AS AN IMPORTANT MEMBER OF THE GLOBAL INDEPENDENT MEDIA COMMUNITY, MIKIVERSE POLITICS HONOURABLY REQUESTS YOUR HELP TO KEEP YOUR NEWS, DIVERSE,AND FREE OF CORPORATE, GOVERNMENT SPIN AND CONTROL. FOR MORE INFO ON HOW YOU MAY ASSIST, PLEASE CONTACT:themikiverse@gmail.com
No comments:
Post a Comment