House of Representatives

Second Reading Speech

Mr Ripoll (Parliamentary Secretary to the Treasurer)

I move:

That this bill be now read a second time.

Schedules 1, 2 and 3 of the bill amend the Banking Act 1959, the First Home Saver Accounts Act 2008 and the Life Insurance Act 1995. The changes reduce from seven years to three the period of inactivity before bank accounts and life insurance moneys are treated as unclaimed. Currently, authorised deposit taking institutions are required to transfer accounts to the Australian Securities and Investments Commission where there has not been a deposit or a withdrawal, other than bank fees, for seven years. 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 matures. To help reunite people with their unclaimed money, 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. Under the amendments the inactive period will be shortened to three years and interest will be paid at a rate equivalent to consumer price index inflation from 1 July 2013. This will ensure that bank accounts and life insurance amounts reclaimed from ASIC maintain their real value-a very important amendment and a very good one for consumers.

Schedule 4 of this bill amends the Superannuation (Unclaimed Money and Lost Members) Act 1999 to change the circumstances in which small lost accounts and accounts of unidentifiable members are required to be transferred to the Commissioner of Taxation and to provide for the payment of CPI interest on unclaimed superannuation money. The first change relates to small lost accounts. The account balance threshold below which lost accounts are required to be transferred to the Australian Taxation Office will be increased from $200 to $2,000 where the account has been inactive for a period of five years or the member is uncontactable. The second change relates to the tiny proportion of superannuation accounts where the member is unidentifiable. These are accounts where the superannuation provider is satisfied that it will never be possible for the provider to pay an amount to the member-for example, where they are missing both the member's name and tax file number. The period of inactivity before which the accounts of unidentifiable members are required to be transferred to the ATO will also be reduced from five years to 12 months. These amounts represent only a tiny proportion of superannuation-in fact, less than 0.1 per cent.

Individuals can reclaim at any time superannuation accounts transferred to the ATO. However, no form of interest is currently paid when they are reclaimed. Under the new arrangements interest will accrue and be payable from 1 July 2013 on all superannuation accounts reclaimed from the ATO, further boosting an individual's retirement savings-again, a win for consumers. The ATO has a number of strategies in place to help reunite members with lost super accounts to help reduce the number of inactive and unnecessary accounts. ATO programs like SuperSeeker have helped to reunite about 1.9 million lost and unclaimed superannuation accounts worth $3.2 billion-that is $3.2 billion going back to ordinary people for their retirement savings. This was done with their owners during the 12 months to 30 June this year. This was the first time the amount of lost and unclaimed super has declined, after reaching a peak of almost $21 billion at 30 June 2011. By transferring more small lost accounts to the ATO and paying CPI interest, these accounts will not only be properly protected from being eroded from fees and charges but will also maintain their real value over time.

The Treasury estimates that, under the current rules, a 20-year-old with $1,000 in superannuation can unknowingly have their super savings eroded to just $418 after five years by a range of fees and deductions. Fees and insurance charges typically exceed average investment earnings, even for accounts with $2,000. For example, a 30-year-old with $2,000 can unknowingly have their super savings eroded to just $1,250 over the same five-year period. However, as a result of the new arrangements a 20-year-old with $1,000 currently inactive in super is expected to be able to claim $1,131 from the ATO after five years-a boost to their superannuation savings of around $700 compared with the current arrangements. This is a massive win for consumers and a proper way to deal with people's retirement savings. A 30-year-old with $2,000 is expected to be able to claim $2,263 from the ATO after five years-a boost to their superannuation savings of around $1,000 compared with the current arrangements.

These are good and sensible changes that help reunite consumers with their lost bank accounts and superannuation accounts. This also maintains the value of those accounts into the future. The new arrangements will also help reduce the number of superannuation accounts that have unidentifiable members by reducing the period of time for which a superannuation fund can hold the account of an unidentifiable member. This will encourage funds to collect sufficient information to identify members during the period when contributions are being made.

Schedule 5 of this bill amends the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 to streamline the processes around the administration and distribution of unclaimed moneys and properties under the Corporations Act.

Currently unclaimed property, including unclaimed money, is handled by the regulator, by ASIC, on behalf of the Commonwealth and deposited into the Companies and Unclaimed Monies Special Account on receipt, CUMSA. Under the amendments, unclaimed property will be recognised directly in the Commonwealth consolidated revenue fund upon receipt by ASIC. Owners of unclaimed property will be able to lodge claims for unclaimed property at any time, the same as with any accounts-so nothing there changes. In addition, owners of unclaimed property will for the first time be paid an interest component equal to CPI inflation for amounts reclaimed after 1 July 2013.

I can inform the House that the Ministerial Council for Corporations has been advised of these changes to the corporations legislation in accordance with the Corporations Agreement 2002. Full details of the measures in this bill are contained in the explanatory memorandum. These are good, sensible changes. I commend the bill to the House.

Debate adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.