Accountant Bryan Lukav says the move on inactive bank accounts is ‘just ridiculous’.
Photo: Jesse Marlow
Thousands of bank account holders are being advised to make transactions of as little as $1 to avoid having their accounts transferred to the Australian Securities and Investments Commission to help plug the federal government’s budget deficit.
Under recent changes to the law designed to raise $109 million this financial year, deposits can be deemed unclaimed if a transaction has not been made on an account for three years or more, down from seven years previously.
Accountant Bryan Lukav oversaw an account for a client that contained the bond for a commercial property. He was advised to withdraw or deposit at least $1. If he didn’t, he was told the government could seize the account.
Mr Lukav said the change would make life difficult for people in business who used these kind of accounts. Trusts and long-term savings accounts are also likely to be caught up in the sweep.
“Imagine if I was looking after 200 property accounts and I had to do that for every one,” Mr Lukav said. “It’s just ridiculous. The bond could sit here for the period of the lease, which could be five, 10 or 25 years and there is no need to withdraw or deposit.”
Westpac Banking Corp told customers in a recent letter: “We encourage you to transact (even a minimum of $1.00) on the account listed above within the next 72 hours otherwise you may be at risk of having the balance in this account transferred to the Australian Securities and Investments Commission (ASIC), which will occur on ASIC’s request.”
The letter said interest payments, fees and charges were not considered a transaction that could prevent the balance from being classified unclaimed. People whose money is transferred to ASIC can get it back if they can prove it is theirs.
A Westpac spokesman said the bank was complying with the legislation and would continue to warn customers appropriately.
In a bid to post a surplus this financial year, the government also made the Reserve Bank of Australia pay it $500 million from a reserve fund. It abandoned the surplus target in December.
The government said last year it expected to raise $760 million from unclaimed accounts, which included unclaimed superannuation, life insurance and first-home saver accounts.
All authorised deposit-taking institutions must submit an annual unclaimed money return to ASIC by March 31 for accounts that have been dormant for seven years and by May 31 for accounts that have been inactive for three years.
Australian Bankers’ Association chief executive Steven Münchenberg said the change was irresponsible and was designed to boost the federal budget’s bottom line.
“I think at the time it was very much seen as revenue by the government and they would count that money towards achieving a surplus that they hoped to achieve at that time,” he said.
“Obviously some of that money will be claimed back, but in the interim it counts as the government’s money.”
The government sought to rush the legislation through Parliament. This was opposed by the finance industry, as well as independent MPs Rob Oakeshott, Tony Windsor, Bob Katter and Craig Thomson.
Reservations about the legislation led to a Senate committee inquiry that heard industry concerns about the haste of the implementation. The legislation was passed in December.
Mr Münchenberg said the government’s attempts to rush the bill through Parliament proved it was a revenue-boosting exercise.
“You can’t help but be suspicious as to what the real reason is if they’re in such a hurry to do that,” he said. “The urgency is presumably because it impacts on the government’s fiscal position. We don’t dispute that there’s a lot of accounts out there that people have simply forgotten about, but this sort of sweeping rule that everything over three years has to go to the government can override customer preferences.”
A spokeswoman for Treasurer Wayne Swan said that under the new legislation, the government would pay interest on lost money to preserve its real value until it could be reunited with its owners.
“There are literally hundreds of thousands of Australians with money in old bank accounts and lost superannuation,” the spokeswoman said.
“Under the old rules, lost super and unclaimed monies are not paid interest and are held for long periods of time by banks and super funds and eroded by fees, charges and inflation.
“It’s infinitely harder to search for lost monies if they are held privately by banks and super funds – if you’ve forgotten about your money, you’re hardly likely to remember which bank it’s in.”
Mr Münchenberg said that once ASIC took control of an account it often took months to reclaim the balance.
“I think a lot of people are going to get caught,” he said. “At some stage, they are going to try to access their account and the money’s no longer there. To get it back, they have to get a form and go through the government and it can take months.”
This story first appeared on The Australian Financial Review.