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Australian Government Withdrawing Funds From Inactive Accounts Warning

Circulating message warns that the Australian Federal Government can now take money from bank accounts that have had no deposits and withdrawals for three years because such accounts are deemed inactive.

government inactive accounts warning

© newlight

Brief Analysis
The claims in the message are true. In December 2012, existing legislation was amended to give the Australian Federal Government the power to take money from "inactive" bank accounts after just three years rather than the previous seven.  This controversial and unpopular change came into effect on May 31st, 2013. Account holders can reclaim their money via ASIC, but this can be a lengthy process.

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Government withdrawals from private bank accounts Through the ABC, it was announced by the CEO of the Bankers Association, that today the Federal Government will withdraw all money from bank accounts that have had no activity for the last 3 years, and the bank will then close that account. This money will be put into general revenue to help pay off debt (I suspect this has something to do with Standard & Poors announcement last week that Australia could be about to lose it's AAA credit rating). What this means is if you have money in an account in any financial institution, including credit unions, etc, and you have not made a withdrawal or deposit into that account in the last 3 years, then they are going to claim it and you will lose it.


To prevent this from happening to your account (if applicable), you need to go to the bank today and put $1 (or any other amount) into that account (or make a withdrawal).

History: This rule has always been in place since the bill was originally passed in the dim dark past, except that it used to take effect after 20 or 50 years. Then not that long ago it was apparently dropped to 10 years, without anyone noticing. Now the Gillard government has just dropped it to 3 years. If you put money in a new account for your children when they were born, so it would be there for them when they reach adulthood ... you will be affected. If your elderly parents have left money sitting in the bank for the last 5 years hoping to get some interest, they will be affected. If you have inheritance money sitting in an account for 3 years awaiting outcome of legal argument (eg probate), you will be affected. If you know someone living overseas for the last 3 years, who thought they could leave their money sitting in the bank while they were away, they will be affected.


Detailed Analysis

This widely circulated message warns Australian recipients that the Federal Government now has the power to take money from bank accounts that have been classified as being inactive for three years. It explains that, if an account holder has made no deposits or withdrawals during a three year period, the government will consider the account officially inactive and will have the bank transfer all funds in the account to the government's own coffers.

The claims in the message are, for the most part, factual. From May 31st 2013, the Australian Federal Government can indeed seize funds kept in some bank accounts that have had no deposits or withdrawals for the previous three years and transfer them to the Australian Securities and Investment Commission (ASIC). The government deems such accounts "inactive". After receiving this "unclaimed money", ASIC then transfers it to the Commonwealth of Australia Consolidated Revenue Fund.

It should be pointed out that the government has always had the power to take money from inactive bank accounts. However, prior to May 31st 2013, an account had to be inactive for seven years (not ten as claimed in the message) rather than three. In December 2012, Commonwealth laws that govern unclaimed money were amended so that accounts could be deemed inactive after just three years rather than the previous seven. ASIC notes:

This [change] means that some money may be identified as unclaimed after a period of 3 years (previously 7 years).

This may occur, for example, where you do not deposit or withdraw money from a bank account for a period of 3 years or more. The payment of fees or the receipt of interest are not considered to be withdrawals or deposits.

The move has been widely criticized with experts predicting that many people will be caught out by the change. In fact, several such cases have already been reported including one in which a Brisbane woman had $150,000 taken from a business account.

Financial commentators have pointed out that there are many legitimate reasons why a bank account might stay untouched for three years or more and have slammed the move as nothing more than a Government money grab.

Banks do reportedly attempt to inform customers who may be affected by the legislative changes, but due to address changes and other factors, it is by no means guaranteed that customers will receive such notifications in time.

The only good news in this scenario is that affected account holders can get their money back by applying to ASIC. Information on the ASIC website notes:

The unclaimed money received by ASIC is always claimable by the rightful owner, so there is no time-limit within which a rightful owner must make a claim. The money remains available to claim, even though it has been transferred to the Consolidated Revenue Fund. From 1 July 2013, interest will also be payable.

However, this claim process may take several weeks to complete.

If you do have accounts that have not been touched for a lengthy period, be sure to make at least one deposit or withdrawal every year or so to keep the account "active". It is also important that you inform financial institutions of any address or contact changes so that notifications about your accounts will reach you.

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Last updated: July 4, 2013
First published: July 4, 2013
By Brett M. Christensen
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