The law
A member is lost inactive under subregulation 1.03A(1)(b) of the SISR or subregulation 1.06(1)(b) of the RSAR when:
- they joined more than two years ago
- the provider has not received any contributions or rollover amounts for that person within the past five years
- they joined as a standard employer-sponsored member (applies to funds only).
Best practice – ATO guidance
The inactive tests outlined within legislation are intended to provide tangible steps for you to take to determine if a member knows about and is engaged with their account. However, this protocol document cannot cover every scenario or circumstance of every member.
With reference to the Guiding principles for industry best practice provided at the start of this document, funds should take into account their member's individual circumstance when applying this best practice guidance, within the bounds of legislation.
Example
An individual has met the permanent exclusion test by way of a 'positive act', but has subsequently made no contributions or rollovers to their account, and has not demonstrated any indication of engagement. We would expect you to revisit your permanent exclusion of this member from being considered lost after a reasonable amount of time.
When you determine what a reasonable amount of time is, you should take into account your member's individual circumstances and decide whether your action is appropriate.
End of exampleEmployer-sponsored arrangement
An employer-sponsor is an employer who contributes, or would contribute, to a fund for either:
- the benefit of a member of the fund who is an employee or an associate of the employer
- the benefit of dependants of the member in the event of the member's death in accordance with an arrangement between the employer and the trustee of the fund.
A standard employer-sponsored member is a member of a regulated super fund for whom an employer-sponsor contributes, or would contribute, wholly or partly according to an arrangement between the employer-sponsor and the trustee of the fund.
No contribution or rollover in five years
You should determine if you have received a contribution or rollover for the member or account holder within the last five years from the date you reported the member as a lost member.
The reference to the non-receipt of a contribution or rollover in the past five years applies to the membership with you and not to an individual account.
Example
John joined ABC Fund and opened an account as a standard employer-sponsored member in 1990. Over the subsequent years, he opened additional accounts with the same fund on a public offer member basis. In the last five years, the only contributions made have been to one of these additional accounts.
Although the employer-sponsored account alone would meet the five year inactivity test, John is not considered a lost inactive member under the inactive member test. This is because he has made a contribution in the last five years in relation to an account with that provider.
End of exampleInactive members and permanent exclusion
Refer to Permanent exclusion for related legislation.
There are two tests you should apply when considering if a member should be permanently excluded from being lost. For inactive member accounts, these tests are:
1. The positive act test
The positive act exclusion test can only apply in relation to members who have satisfied the inactive member test – that is, they originally joined as standard employer-sponsored members.
To determine whether the positive act exclusion applies, the inactive member test is read in conjunction with the exclusion. Generally, if there has been any positive activity by the member in relation to their membership with you, then the member will not be considered lost.
The example of ‘positive act’ given in the legislation is ‘deferring a benefit’. This can also apply when a third party (for example, a financial advisor or super agent) authorised to act on the member's behalf is involved. For example, the third party may tell you of the member's wish to amend their investment strategy.
Positive activity may include member activity such as:
- deferring a benefit in the fund
- electing to rollover all or part of their benefit from their original policy to another product (and it is not an automatic transfer)
- initiating a transaction (for example, a switch)
- changing their contact details
- initiating a change to their account (such as nominating a beneficiary)
- making an enquiry (such as an account balance query, performance of their account) or complaint
- responding to a communication issued by you
- accessing your secure website to view or obtain information about their account.
This activity indicates the member is aware of where their money is, and is engaged with their account so you should exclude the member from being a lost member.
The legislation does not outline for how long a positive act should be effective before you check in with your member again. When considering what a reasonable amount of time is you should take into account your member's individual circumstances and decide whether your action is appropriate.
Further guidance on the criteria you should consider has been provided in Guiding principles for industry best practice.
A positive act does not include a failure to act, which may arise where the super provider writes to the member asking them to respond if they do not want the provider to do something (see Westpac Banking Corporation v Commissioner of TaxationExternal Link (1996) 70 FCR 52; [1996] FCA 1834; 96 ATC 5021; 34 ATR 143).
2. Contact by the member indicating they want to remain in the fund or RSA indefinitely.
This second permanent exclusion test also applies to uncontactable members. Refer to Uncontactable members and permanent exclusion for detailed guidance.
Lost inactive scenarios
When considering these scenarios, remember you should exercise reasonable effort to contact your member, if they become lost for any reason. The best outcome is for the member to be made aware of their account and for you to receive an indication of engagement which will ensure the member's account is not lost.
Scenario 1
The member has been a member for over two years.
You have not received contributions for the past five years.
The member is not a standard employer-sponsored member.
This member is not lost inactive.
The member is not an employer-sponsored member so the inactive test does not apply to the member.
End of example
Scenario 2
The member has been a member for over two years.
You have not received contributions for the past five years.
The member is a standard employer-sponsored member.
You have not verified the member's address in the past two years.
The permanent exclusion criteria do not apply.
The member is lost inactive.
All lost inactive member tests have been satisfied.
End of example
Scenario 3
The member has been a member for over two years.
You have not received contributions or rollovers for the member in the past five years.
The member is a standard employer-sponsored member.
You have verified the address in the past two years.
The permanent exclusion criteria do not apply.
The member is not lost inactive.
The member's address has been verified in the last two years and you have no reason to believe the address is now incorrect.
End of example
Scenario 4
The member has been a member for over two years.
You have received no contributions or rollovers for the member in the past five years.
The member is a standard employer-sponsored member.
The member has contacted you and informed you they are travelling overseas for five years, and confirmed their desire to remain a member of the fund during this time.
The member is not lost.
The ‘permanent exclusion’ criteria apply, however considering the individual's circumstances, you should review this situation in five years.
End of example
Scenario 5
A person starts a new job with employer ABC.
The person is enrolled by his employer in fund XYZ as a standard employer-sponsored member.
Two years later, fund XYZ winds up.
Rather than go into the successor fund, the member decides to use an existing account he had previously opened with the ABC Public Offer Fund as a public offer member.
The member rolls his super money from fund XYZ into his ABC Public Offer Fund account.
The member can never become lost inactive.
The member did not join the ABC Public Offer Fund as a standard employer-sponsored member, so the inactive test does not apply to the member.
End of example
Scenario 6
The member joined the industry sub-plan of XYZ Fund as a standard employer-sponsored member.
The member subsequently left the employer.
Under the sub-plan rules, because the member has left the employer he can no longer remain in the sub-plan.
After considering his options, the member rolls his super into the public offer plan of XYZ fund.
The lost inactive criteria will apply for this member. The member could become lost inactive if a contribution or rollover is not made for a five year period.
Even though he is now in the public offer section of the fund (and is thus considered to be a public offer member), his membership first began with XYZ Fund through a standard employer-sponsored arrangement.
End of example