As part of the Stronger Super reforms, the Government introduced
MySuper, a simple product designed to replace existing
superannuation default products from 1 July 2013.
The MySuper reforms will require superannuation funds not
wishing to offer MySuper products to transfer those default
members, their benefits and relevant assets to another
superannuation fund offering a MySuper product.
If this mandatory transfer of assets creates a capital gains tax
(CGT) liability, the relevant default members
could be adversely affected. This is particularly because under the
current law, realised capital and tax losses cannot be transferred
to the receiving fund and an income tax liability could arise from
the realisation of assets on transfer.
The exposure draft legislation is intended to provide relief
from the above tax consequences by amending Income Tax
Assessment Act 1997 (Cth) (ITAA 1997).
It is proposed that a complying superannuation fund will be able
to defer an income tax liability for assets transferred by
choosing a CGT roll-over for transferred assets (optional CGT
to transfer realised capital losses and tax losses to another
entity (optional loss transfer); or
both of the above.
The choice by the transferring superannuation fund will be
conveyed by the way it completes its income tax return for the
income year in which the accrued default balances are
Optional CGT roll-over
A transferring complying superannuation fund can choose an
optional CGT roll-over for transferred assets if they are
reasonably attributable to the accrued default balance of the
transferring default members.
The consequence for the transferring entity is it disregards any
capital gains or capital losses associated with the asset
The consequences for the receiving entity are as follows:
the receiving entity is treated as having acquired the asset
for the transferring entity's cost base to ensure deferral of
CGT consequences until a later dealing with that asset by the
the date of acquisition of asset is when it is transferred to
the receiving entity; and
despite the above, for the purposes of the 12 month CGT
discount ownership requirement under section 115-25 ITAA 1997, the
receiving entity will be taken to have acquired the asset on the
same day as it was acquired by the transferring entity.
Optional loss transfer
A transferring complying superannuation fund can choose to
access the loss transfer option by transferring realised capital
losses or tax losses that reflect the tax value of losses
incorporated in members' account balances. This prevents the
value of losses remaining with the transferring fund to the extent
those losses are attributable to the accrued default amounts of the
The consequence for the transferring entity is a reduction in
its capital losses or tax losses by the transferred amount.
The consequence for the receiving entity is it is taken to have
made a corresponding capital loss or tax loss on the day the
accrued default amounts of the transferring members are
transferred. This enables the receiving entity to either:
use transferred capital losses against capital gains in future
income years; or
in relation to a transferred tax loss, deduct losses in the
income year of the account transfer.
Both the CGT roll-over and loss transfer options do not apply if
there is an arrangement to merge the two relevant complying
superannuation funds. The Government has proposed separate tax
relief for merging superannuation funds.
TIMING OF NEW REGIME
The taxation relief to facilitate any mandatory transfers to a
MySuper product will apply from 1 July 2013 to 1 July 2017. This
time period corresponds to the date when MySuper is introduced and
the deadline for transferring a superannuation fund's existing
default members' interests to a MySuper product.
The closing date for submissions on the exposure materials is
Friday, 3 May 2013.
We are available to provide you with further information or
guidance about this issue.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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