Investment Magazine

Government considers tax relief for fund mergers

  • 13 April, 2012
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This is an archived article originally published on I&T News
“The government is considering requests from funds for further merger relief,” says the office of Bill Shorten, the Minister for Financial Services and Superannuation

The Australian government is considering whether to provide tax relief to superannuation funds that want to merge but have suffered investment losses they don’t want members to shoulder after a merger.

“The government is considering requests from funds for further merger relief,” says the office of Bill Shorten, the Minister for Financial Services and Superannuation, in an email. Shorten’s office did not elaborate.

The Government is responding to the concerns of Cath Bowtell, a former senior union official and chief executive officer of the $4.6-billion Australian Government Employees Superannuation Trust. Bowtell says the fund may delay a June 30 merger with AustralianSuper if it has to crystallise investment losses.

AGEST’s losses are about $45 million, mainly from investments in stocks and private-equity funds since 2008. Until September last year, the government provided tax relief to superannuation funds that had suffered investment losses and were planning to merge.

Bowtell says mergers between superannuation funds will probably not occur if such relief is not once again granted.

“From a trustees point of view, they have a duty to preserve the value of an asset and it is not in a member’s interest to write off the value of an asset,” says Bowtell. “Merging with AustralianSuper will trigger a capital-gains event but AGEST doesn’t get to carry the value of losses to offset future gains. We either have to get government relief or markets have to recover if we hope to merge by June 30. If we don’t, we may have to defer the merger.”

AustralianSuper’s chief executive Ian Silk echoes Bowtell. Silk says members of funds involved in a merger must not be placed in a worse financial situation than they were before the merger.

The Association of Superannuation Funds of Australia urged the government to provide capital-gains tax relief when superannuation funds merge.

“Even if they announce it in the budget, it will be too late for funds that want to merge by June 30,” says Pauline Vamos, ASFA’s chief executive.

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