Senator Nick Sherry, Minister for Superannuation and Corporate Law has announced that, with effect from tomorrow, the Rudd Government will provide an optional capital gains tax (CGT) roll‑over for capital losses arising from CGT events happening under a complying superannuation fund's merger with an APRA‑regulated superannuation fund with at least five members before 1 July 2010.
"Mergers of super funds can lead to improved economies of scale, including more cost effective services to members. In the current financial climate, it is important that potential barriers to a robust and efficient super industry are minimised."
"Limited CGT roll‑over will assist super funds in a net capital loss position seeking to merge with other funds by preserving the CGT offsetting value of any net capital loss," Minister Sherry said.
Typically, the transfer of assets from one super fund to another, as part of a merger of the funds, triggers the realisation of capital gains or losses for the transferring fund. If the transferring super fund is in a net capital loss position, its winding up following these transfers will lead to these losses being extinguished.
This roll‑over will preserve the value of these capital losses in the receiving super fund – allowing them to be offset against capital gains in the future.
Any capital gains that may be realised under such a merger would continue to be taxable. However, as capital gains and losses are calculated on an asset-by-asset basis, providing an optional roll‑over will allow the transferring fund to choose not to disregard capital losses realised under the merger to offset against any realised capital gains.
The Government will provide this limited CGT roll-over as a short‑term measure. The Australia's Future Tax System Review is also considering the taxation of capital. The Government will reconsider this measure after receiving the Review Panel's final report.
Consultation will be undertaken on these amendments. Treasury will initially release a consultation paper on its website (www.treasury.gov.au) in January 2009.