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Calls for CGT merger relief
Friday, 13 April 2012 12:25pm

Lack of clarity around the Government's intention for providing capital gains taxation relief for superannuation mergers is damaging members and limiting MySuper outcomes, according to AustralianSuper and ASFA.

With the rising trend of super fund mergers in the lead up to the introduction of the Government's Stronger Super reforms, the Association of Superannuation Funds of Australia (ASFA) has argued that it is fitting for the Government to provide CGT merger relief through the transition period.

"To date, the Government has yet to provide a statement on whether it will or will not provide relief. The lack of certainty is now impacting on the super industry's ability to transition efficiently to MySuper," said Pauline Vamos, ASFA chief executive.

"... ASFA has argued that where the Government introduces significant regulatory changes that have impacts on the structure of the superannuation industry then it is appropriate that CGT merger relief be provided to enable super funds to make a properly considered decision whether to continue to operate on a standalone basis."

Vamos said often funds are put off mergers due to the loss of the value of the Deferred Tax Assets which impacts on members.

ASFA said that super funds are currently carrying Deferred Tax Assets equivalent to between 1% and 3% of member account balances, where trustee fiduciary duties would prevent a merger progressing if it would result in a significant loss to members.

"If the Government has decided not to provide CGT merger relief then ASFA believes that it should announce this in order to end industry uncertainty. The Government should in this case acknowledge that the overall benefits of introducing MySuper will be reduced, and that in fact some funds may need to increase fees in order to compete in the new environment when they may otherwise have merged," said Vamos.

Ian Silk, chief executive of AustralianSuper, agreed with ASFA's position and said that the uncertainty is preventing mergers from occurring and disadvantaging members.

"AustralianSuper firmly believes that members of funds in a merger, must not be placed in a worse tax position after a merger than before the merger," said Silk.

"This is a revenue-neutral policy for the Government, because if this change is not made most trustees will simply not proceed with mergers whilst there is a financial disadvantage to their members."

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