The Association of Superannuation Funds of Australia (ASFA) made its final appeal to government yesterday for capital gains taxation (CGT) relief to superannuation funds that decide to merge.
There was an immense urgency for the government to act well before next month’s Federal Budget to allow super funds sufficient time to merge by 30 June 2012, thus providing members and service providers with notice of the merger, ASFA chief executive Pauline Vamos said.
“It’s a timing issue – if funds don’t get this relief now, they have really run out of time to get the required notices to their members,” Vamos said.
“This is our last ditch effort. We’ve tried everything so we thought we’d try once last time.”
The Stronger Super reforms had caused superannuation funds to consider whether to operate as a standalone entity or merge with another fund.
However, due to superannuation fund trustees’ fiduciary duties, mergers could not be completed without CGT relief as it would cause a significant loss in the value of the Deferred Tax Assets (DTAs) of the fund, which would directly impact member account balances.
Super funds were currently carrying DTAs equivalent to between one and three per cent of member account balances, although the level was fluctuating due to volatile markets.
ASFA had made several attempts and lodged formal submissions over the past 12 months to make CGT permanent, if not extended throughout the reform period as a minimum.
Treasury neither provided a response nor made any indication of its intention for the CGT merger relief, Vamos said.
“We don’t know whether it’s in the budget and we can’t wait for the budget,” she said.
“If the government has decided not to provide the CGT merger relief then ASFA believes it should announce this in order to end industry uncertainty.
“It is desperate stakes for us at the moment.”
