Australian government bows to tax pressure
27 April 2012 Australia
Image: Shutterstock
The Australian government has decided to extend capital gains tax (CGT) rollover relief for superannuation funds in mergers until 2017, after continued protest by the superannuation industry.
“It’s great that the government has accepted the [industry] representations,” says Mick Giddings, head of tax policy at NAB Asset Servicing.
“It is entirely consistent with the Cooper Review and the recommendations in there. It’s really, then, giving further effect to the recommendations of the Cooper Review, and it was the government who set up that inquiry in the first place.” ??
Temporary CGT loss relief was introduced at the end of 2008, and allows funds otherwise lost when the merging fund is wound up, to transfer losses when they merge. The temporary CGT rollover relief extension expired in 2011.
“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," says Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia (ASFA).
“Super funds are currently carrying Deferred Tax Assets (DTA) equivalent to between 1 and 3% 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.”??
“It’s great that the government has accepted the [industry] representations,” says Mick Giddings, head of tax policy at NAB Asset Servicing.
“It is entirely consistent with the Cooper Review and the recommendations in there. It’s really, then, giving further effect to the recommendations of the Cooper Review, and it was the government who set up that inquiry in the first place.” ??
Temporary CGT loss relief was introduced at the end of 2008, and allows funds otherwise lost when the merging fund is wound up, to transfer losses when they merge. The temporary CGT rollover relief extension expired in 2011.
“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," says Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia (ASFA).
“Super funds are currently carrying Deferred Tax Assets (DTA) equivalent to between 1 and 3% 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.”??
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