3 major superannuation compliance breaches in recession

Batallion legal is one of the premier taxation practices in Australia - having a diverse capability in the area and being widely published. They advise on income tax, capital gains tax, FBT, GST, stamp duty, land tax, pay-roll tax and trust arrangements. Batallion legal can assist individuals and businesses on effective tax planning and structuring, and ensure that all our other legal matters deal with tax considerations effectively.

If you would like their assistance with any taxation issue, please contact them

Higher fees can reduce your fund balance

When you lose your job or move jobs and do not roll over your super - you could be paying double the fees to the fund managing your super.

When a worker joins an employer, choice of superannuation is usually not exercised and the employer ends up contributing the compulsory superannuation guarantee 9% to a default fund.

In recessionary times, if a worker loses his job and when no new contributions are made on behalf of the employee the default fund usually transfers the balance of the member into another "Rollover fund" within the same or another fund where the fees are sometimes double.

Senator Nick Sherry had the following to say in his interview with Owen Delaney Mornings on 2SM with Owen Delaney Wednesday, 18 March 2009

"Well, it is unfair and, indeed, it's unconscionable and is outrageous. What happens, as I understand, is that some retail funds enter into an agreement with an employer to become the default fund. In superannuation, many individuals - in fact, the majority - don't select a fund, so there's a default fund, because the money has to go somewhere. And some retail funds might charge a fee of one per cent, say, when the person's an employee of that employer. And then when they are retrenched or move jobs, the account balance is shifted to another section, and the fee is doubled in many cases.

Now, this is an outrageous practice. It's been kept secret. I'm very pleased to see now that it's being exposed, because, as I understand it, there would be hundreds of thousands of Australians who are if they're retrenched, for example, not only have they lost their job, their superannuation fees could double as well".

The good news is that the senator is taking steps to stop this practice, his view is:

"It is unconscionable behaviour. And, in fact, there's the same investment option, the level of service doesn't change. Nothing changes other than the worker loses their job and their fees are doubled because they've lost their job.

It's the same superannuation fund structure in the retail sector where this happens. So it is unconscionable behaviour. I've asked the regulator to give me a report on how many firms are doing this, how many retail funds are doing this, and the estimated number of people affected. And I understand it will be literally in the hundreds of thousands. This practice has been kept secret for too long. And then, we will act to stop this sort of bad behaviour"