New rules change the inactive bank account law from SEVEN to THREE years, but now allow Interest to be paid.
Inactive bank accounts in Australia, after SEVEN years of inactivity, have previously had any balance transferred from the holding Bank, to a national government department, from where the funds can be claimed at any later stage, WITHOUT payment of interest.
This only applied to accounts with balances OVER $500, although a figure of anything higher than $100 could have been imposed at any time as the current regulations state a minimum of $100. Source: ASIC
“Inactive” means NO customer deposits or withdrawals, the charging or crediting of fees or interest does NOT count as a deposit or withdrawal.
Do YOU have any unclaimed balances ? Check online at: www.moneysmart.gov.au
This is a system also used by various other countries. www.abcdiamond.com/inactive-dormant-bank-accounts-forfeited-to-governments
However, recent legislation has now been passed through parliament, and from May 31, 2013 these funds can now be transferred after just THREE years of inactivity, and could use a balance figure of under $100, if the Government so dictates. Banks have been able to advise these over 3 year old balances, since January 31st, 2013.
Newspapers headlines are now stating examples such as:
HOUSEHOLDS face losing up to $109 million from their family savings as the Federal government moves to seize cash from inactive bank accounts.
This is not totally correct as the account holders can always get their money back.
The only difference is that the Government can utilise this money for public use, rather than the banks profiting from themselves holding on to it.
Also, From 1 July 2013 when unclaimed money is paid to a claimant, the Commonwealth of Australia will now pay interest to the claimant. The amount of interest and the method of calculating the interest will be determined by Regulations (which are yet to be released). Previous rules stated that NO interest would be paid.
Stop your money from becoming unclaimed
To stop your money from becoming unclaimed:
- Make a small deposit (even 5 cents will do) or a small withdrawal from your bank account once every 2 to 3 years. (ASIC advice)
- Keep in contact with your financial institution and tell them your new address when you move. (ASIC advice) The bank will then notify you before the inactive period kicks in.
- Set up an automatic internet transfer, once a year of say $1 to or from another account, and maybe back again, if needed. (My suggestion)
- Spend it 😀 (My even better suggestion)
Where does unclaimed money go?
Money from unclaimed shares, bank accounts and insurance policies is paid by institutions to ASIC but ASIC does not keep the funds. The money is transferred to the Commonwealth of Australia Consolidated Revenue Fund but is available to be claimed at any time by the rightful owner. There are no time-limits on claiming this money.
Newspaper reports are also stating that: “accounts with anything from $1 upwards that have not had any deposit or withdrawals in the past three years will be transferred to the Australian Securities and Investment Commission.”
The new regulations are stating a figure of $100, although some flexibility is permitted. Technically this wording would be more accurate:
accounts with anything from $1 upwards that have not had any deposit or withdrawals in the past three years MAY be transferred to the Australian Securities and Investment Commission.
They do have to work out the economics of all the paperwork for such a small balance, and I doubt they would go down that far. The current law states $100, but they set it at $500 for viability reasons.
About $109 million is estimated to being held by the banks, where these accounts have been inactive for between 3 and 7 years, and this money will top up the Treasury reserves, until it is reclaimed by the owners, from ASIC.
Experts warn this will have a negative impact on people that may have put money away in a special account for their children’s education or decided to put an inheritance in a separate account for a rainy day. My view is that most people keep topping up these accounts, and they normally advise the bank of any change of address, it would make sense for the banks to advise their customers before having to do all the paperwork to transfer the account to the treasury.
Extracts from the new Regulations
1.8: Under the current provision, unclaimed moneys which are not less than $100 or a higher prescribed amount are required to be reported and transferred (Subsection 69(3), Banking Act). Consequently, regulations may only prescribe an amount higher than $100. The current prescribed amount is $500, which was set by the Banking (Unclaimed Moneys) Regulations 1993.
1.12: The new arrangements amend the minimum unclaimed money amount that is required to be reported and transferred to ASIC from $100 or a higher prescribed amount to be $100 or such other amount as may be prescribed.
2.2: Unclaimed moneys are FHSAs where there has not been a contribution or withdrawal (other than fees or taxes) for a period of not less than seven years and the FHSA provider has been unable to contact the FHSA holder.
2.5: The new arrangements will reduce the period before a FHSA is treated as unclaimed moneys to three years from 1 July 2013. They also allow for the payment of interest from 1 July 2013.
UK Dormant Bank Accounts
Dormant Bank and Building Society Accounts Act 2008, makes available for good causes money which has been lying dormant in bank and building society accounts for 15 years or more. Since being authorised by the Financial Services Authority to begin operations in March 2011, Reclaim Fund Ltd has transferred £98 million of the money it has received from banks and building societies to Big Lottery Fund for reinvestment in the community.
A cornerstone of its operation, however, is that it will retain enough funds to meet any future reclaims so customers will always be able to access money held in accounts they may have forgotten about. To do this, customers should contact their bank or building society directly.
There are an estimated 500,000 dormant accounts in the UK worth around £500m
Statement by David Cameron: “The big society bank will be established using every penny of dormant bank and building society account money” “These unclaimed assets, alongside the private sector investment that we will leverage, will mean that the big society bank will – over time – make available hundreds of millions of pounds of new finance to some of our most dynamic social organisations.”
Search for a lost account in the UK at www.mylostaccount.org.uk a FREE service by the British Bankers’ Association, the Building Societies Association and National Savings and Investments.
The Australian Securities and Investments Commission (ASIC) said there is more than $677 million of unclaimed money languishing in unused bank accounts, share databases and insurance accounts, and has launched a national campaign to try to reunite the money with its rightful owners.
ASIC’s Unclaimed Monies Unit regularly sends letters to people and companies whose names match their records.
New South Wales has the most unclaimed money, followed by Victoria and overseas accounts. Aside from overseas records, WA has the highest average amount of unclaimed money.
The state-by-state breakdown is as follows:
NSW: 549,242 accounts totalling $271,235,859 averaging $591 per account
VIC: 196,879 accounts totalling $142,527,547 averaging $724 per account
QLD: 166,274 accounts totalling $75,986,934 averaging $654 per account
WA: 67,556 accounts totalling $53,411,935 averaging $791 per account
SA: 43,740 accounts totalling $24,350,907 averaging $557 per account
ACT: 15,887 accounts totalling $10,935,940 averaging $688 per account
NT: 13,670 accounts totalling $6,578,211 averaging $670 per account
TAS: 13,670 accounts totalling $6,404,681 averaging $469 per account
Overseas: 85,191 accounts totalling $85,900,934 averaging $1,008 per account
Total: 1,008,253 accounts totalling $677,332,953 averaging $671 per account
Under recent changes made in the government’s Mid-year Economic and Fiscal Outlook, most inactive bank accounts and life insurance policies will be transferred to ASIC after three years of inactivity, rather than the previous seven years.
Also, interest will be paid on unclaimed money held by ASIC at the rate of the consumer price index (CPI) from July 1, 2013 to help prevent erosion of balances.
Interest earned will be tax-free.