SMSF trustees with more than one fund will be granted open-ended tax relief when merging funds after the federal government announced it will permanently extend arrangements that were due to expire in mid-2020.
Tax relief for merging superannuation funds has been available since December 2008 and was due to expire on 1 July 2020, but it has been made permanent as part of changes announced in tonight’s budget.
The tax relief will continue to allow superannuation funds, including SMSFs, to transfer revenue and capital losses to a new merged fund and to defer taxation consequences on gains and losses from revenue and capital assets.
In making the change, the government stated, in the budget papers, that the move will “remove tax as an impediment to mergers and facilitate industry consolidation, consistent with the recommendation of the Productivity Commission’s final report”.
“Consolidation would help address inefficiencies by reducing costs, managing risks and increasing scale, leading to improved retirement outcomes for members,” it said.
SMSF Association head of policy Jordan George said the change was mainly targeted at larger funds that had been identified by the Productivity Commission as underperforming or too small in scale, but may still apply to a very small number of SMSFs.
“The number of SMSFs that would be impacted by this change is a very small percentage,” George said.
“At the association’s most recent conference, the ATO indicated the number of trustees that held more than one SMSF was only around 13,500. It may give some people an opportunity to consolidate, but it is not something we expect to have a wide take-up.”
Self-managed Independent Superannuation Funds Association chair Chris Balalovski said he believed the measure would have a significant effect.
“It definitely does make a difference when it comes to consolidation of the sectors. If it is applicable to the SMSF sector, it will make an impact,” Balalovski said.
“It will give more stability to the sector and restore some confidence to the sector.”
