Lost money in inactive accounts
Lost money in inactive accounts has recently featured in the news as the Commonwealth government reviews the definition of ‘inactive accounts’. Any bank, credit union or building society account is at risk of becoming an ‘inactive’ account that must be paid to the Commonwealth as lost money in an inactive account.
Currently an account is ‘inactive’ if no transactions have been initiated by the owner for seven years. If you have not withdrawn any money or deposited any cash, cheques, pension payments or received any EFT credits then your account could be ‘inactive’ according to the Commonwealth government’s definition. An account could be ‘inactive’ while still having interest credited and bank fees deducted every year.
Lost money in inactive accounts includes bank accounts that their owners have forgotten about. Inactive accounts with credit unions, building societies and other regulated deposit takers are treated as ‘lost money’ also.
Some unclaimed life insurance contracts which have not been claimed on maturity are labelled as ‘inactive’. Similarly superannuation accounts could become ‘lost’ when unclaimed by retirees.
Some inactive accounts have actively interested owners
But not all inactive accounts are really ‘lost money’. Special purpose accounts which are just rolling along closely observed by their owners could be labelled as ‘inactive’.
For example, Joe leases a home from Kim, a private landlord. Joe as a new tenant pays Kim, a rental bond of $1,000 at the start of a three year lease. The landlord, Kim, starts a new bank account to hold the bond paid by Joe. The bank credits the account with interest each year. At the end of the three year lease, Kim is happy to have Joe as a tenant and Joe likes the home so they renew the lease for another three years. The bond money stays in the bank account accruing interest for another three years. If the lease is renewed again for a third three year period then the bond account could be untouched for seven years and the account would become ‘inactive’.
Kim could avoid having the account become ‘inactive’ by depositing another ten dollars into the account each time the lease is renewed. If the inactive period were reduced to only three years, Kim would need to ensure that the $10 deposit was not more than 1,095 days after the previous deposit or his account could be treated as ‘inactive’.
Also Bob and Betty set up a savings account for each new grandchild. These accounts could become ‘inactive’ if no additional funds are deposited into the accounts when the grandchildren are young.
What happens to lost money in inactive accounts?
The banks, insurance companies, credit unions, building societies and any other deposit taking entities are required to transfer all lost money in ‘inactive’ accounts to the Commonwealth government. Yes, lost money in inactive accounts becomes Commonwealth revenue.
Can lost money in inactive accounts be retrieved?
Yes, there is a bureaucratic process to prove ownership of an ‘inactive’ account and get your money back. Your money could be returned many months after you lodge all of the ‘proofs’ required to identify yourself and establish that you are the rightful owner of the account.
Can I find out if my family has lost money in inactive accounts?
ASIC maintains a listing of Lost money in inactive accounts. You can search the list of Lost money in inactive accounts at ASIC. https://www.moneysmart.gov.au/tools-and-resources/find-unclaimed-money/unclaimed-money-search
Hint: Search the list using each variation of your name particularly if your family changed the spelling to shorten or anglicize their names on arrival in Australia.
Financial Care Services checks new client names against the ASIC listing. Elderly folk can forget that other rainy day account.
Can I avoid having my bank account being sent to the Government as ‘lost money’?
You could avoid having your bank, credit union or building society account becoming ‘inactive’ by transacting on each account every year. If you are looking at the account statement to record the interest for tax purposes and/or the balance to report to Centrelink or DVA, then deposit or withdraw something. The amount of the transaction does not need to be substantial maybe $10 would suffice.
Government proposals re lost money in inactive accounts.
Lost money in inactive accounts came to the media’s attention early in 2013 because the government proposes to reduce to three years from seven years, the period of inactivity before an account is deemed to be in ‘inactive’. Thus the government could increase its revenue by having lost money transferred after only three years without a customer initiated transaction.
If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.
Financial Care Services – call (03) 9808 0338
Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations. © 2013 Financial Care Services Pty Ltd. All rights reserved.
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