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."
First, a confession. Mark may have started his career as an economist but he joins this year's panel not as a chief economist but as the head AXA Framlington Asia. This is to the benefit of the audience ... Watch video
James provides a local perspective and explains to the audience why the mining investment boom is an aberration and it is now a 'return to the old normal'. To view James Bond's slides please click ... Watch video
The anchor man of the panel, Saul provides great insights on the domestic economy. And bravely makes the forecast that the Reserve Bank will not cut interest rates this year and that the next move is up ... Watch video
Bob believes plunging oil prices may extend the stockmarket rally by a year or two and discusses why investors could expect a volatile few months. Overall, he believes we are entering an era of low returns ... Watch video
Is the European economy dead in the water? Is faith on Abenomics waning? Why should investors be more optimistic about the US economy this year? Chris Probyn, the Boston-based chief economist of State ... Watch video
Get it Daily
FREE to your inbox, get the Financial Standard Daily Email.