Australia's peak superannuation body today welcomed the Government's decision to change tax laws so that superannuation funds can merge without triggering an adverse tax event.
The Association of Superannuation Funds of Australia (ASFA) said the result was in the best interests of super fund members.
"Fund members would take a direct hit on their accounts if fund mergers were to proceed without the provision of capital gains tax (CGT) relief for funds carrying capital losses," said ASFA chief executive Pauline Vamos.
"Super funds are currently carrying Deferred Tax Assets (DTA) equivalent to between one and three per cent of member account balances.
"A superannuation fund trustee's interpretation of their fiduciary duties means that a trustee is unlikely to complete a merger where it would result in a significant loss to members.
"Either way, without CGT rollover relief, the fund member would bear the brunt of the outcome, as efficiency gains from a merger would not be realised," Ms Vamos said.
The CGT rollover relief, introduced as a result of the global financial crisis (GFC), has allowed newly merged entities to carry forward a capital loss to future tax years, ameliorating losses in member accounts.
"ASFA has consistently advocated for permanent relief in our discussions with Government but at a minimum has recommended the relief apply through the Stronger Super reform period," said Ms Vamos.
"We are pleased to see that relief being announced today. The collaborative advocacy efforts involving many super funds contributing details of their DTA situations to Treasury and Treasurer's adviser has clearly illustrated the issue in a compelling way.
"ASFA will now be talking to Treasury directly about the design of the legislation to ensure it works as intended."
- ASFA originally met with Treasury and Minister Bowen at the height of the global financial crisis (GFC) and was able to convince the Government to introduce legislation to provide loss relief for merging superannuation funds.
- As a result of the GFC many superannuation funds recorded capital losses which could be carried forward as a deferred tax asset.
- If an entity merges however, it loses the ability to take forward that loss.
- Legislation to allow capital gains tax (CGT) rollover relief came into effect in early 2010. This enabled the new merged entity to carry the loss, thereby reducing the negative impact on members.
- The law applied to qualifying CGT events between 24 December 2008 and 1 July 2011. This was then extended by three months.
- ASFA supported Recommendation 10.1 of the Super System Review advocating CGT rollover relief be made permanent for superannuation funds.
- The Review also strongly advocated for further consolidation of funds in the industry to achieve greater efficiency.
- Over the past year, ASFA has advocated strongly and consistently for the rollover relief to be extended, at a minimum, to cover the Stronger Super transition period.
For media inquiries, please contact:
Pauline Vamos, CEO, 0433 169 342
Rebecca Glenn, GM Marketing and Communications, 0416 170 439
Megan McDougall, Media and Communications Coordinator, (02) 8079 0849
About ASFA - the voice of super
The Association of Superannuation Funds of Australia is the peak industry body representing the superannuation and retirement industry. ASFA is the only organisation that represents all types of superannuation funds (retail, industry, corporate and public sector) and associated service providers. ASFA members manage or advise on the bulk of the $1.3 trillion in superannuation assets as at September 2011. Its members represent over 90 per cent of the approximately 12 million Australians with superannuation.