After industry consultation the government will expand the optional capital gains tax (CGT) roll-over for capital losses for mergers of complying superannuation funds with an Australian Prudential Regulation Authority-regulated superannuation fund with at least five members.

The government will extend the period of application of the roll-over by one year to 30 June 2011, allowing super funds wanting to use the roll-over more time to do so.

In December the government announced that optional CGT for capital losses would be provided to 30 June 2010.

"The December announced roll-over which applied from 24 December 2008 removes certain impediments to super fund mergers and these additional changes will remove certain other impediments which have been identified through the consultation," Minster for Superannuation and Corporate Law Nick Sherry said.

The measure will now be expanded to apply to mergers involving pooled superannuation trusts and life insurance companies.

The roll-over will be expanded to permit previously realised net capital losses held in the transferring superannuation entity to be transferred to the continuing superannuation entity and the roll-over or transfer of any revenue losses to the continuing entity.

Compliance costs will also be reduced by allowing superannuation entities in a net capital loss position to roll over assets with both capital gains and capital losses realised on transfer under the merger, rather than just capital losses.

Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos welcomed the announcement.

"The expanded relief was driven by ASFA and it is very welcome. ASFA supports competition, but it is also important that funds wishing to merge are able to do so without crystallising tax losses unnecessarily," Vamos said.

"This is the response of a government that has listened to the needs of the industry to provide better retirement incomes for fund members."