Unclaimed money draft bill released

Treasury has issued an exposure draft setting out the changes to the unclaimed money provisions of the Banking Act that the government announced in March.

The time period bank accounts can be inactive before they are transferred to a government holding account will be changed from three to seven years.

The amendment will restore the arrangement that existed before the Labor government's controversial change in 2012.

Under the law as it stands, an account held by an authorised-deposit taking institution consists of unclaimed money if in the previous three years there have been no transactions in the account other than interest or charges, and the account holder has not checked the account balance online or by phone.

An account holder can notify their ADI that they are aware of the account and do not want it to be considered inactive.

The explanatory memorandum issued with the draft bill says: "The high proportion of effectively active accounts transferred to the Commonwealth each year under the current provisions increases the regulatory burden of the unclaimed moneys provisions for ADIs and account holders."

The unclaimed money provisions are designed to preserve the value of money that might otherwise be lost or eroded by fees. Details of unclaimed money transferred to the government are searchable on the Australian Securities and Investments Commission's MoneySmart website and can be reclaimed.

According to Treasury, around 15 per cent of unclaimed funds transferred from ADIs are reclaimed in the same year they are transferred and 50 per cent of transferred funds are reclaimed within two years.

Treasury said these figures suggested that many of the accounts declared unclaimed are effectively active "as the account holder remains aware of them."

The amendment will exclude foreign currency accounts and children's accounts from the unclaimed money provisions.

The explanatory memorandum said: "Children's accounts are generally established for long periods so that money can be set aside in a high-interest account for a child to access on, for example, their eighteenth birthday. Transferring these accounts to the Commonwealth may result in children losing out on higher interest rates."

The Government is also tightening up on access to information about unclaimed money. Details will still be searchable on the Australian Securities and Investments Commission's MoneySmart website but ASIC will no longer publish the Unclaimed Moneys Gazette.

The Office of the Australian Information Commissioner had raised concerns about the potential for the gazette, which contains detailed personal information, to be used for identity theft.

The Government is seeking comment on the exposure draft and has set a deadline of June 26.