• Miscellaneous - Federal Budget 2019

Superannuation Funds – Administration and Merging Funds Relief

Two measures were announced in relation to Superannuation Fund administration. The first measure relates to providing tax relief to merging superannuation funds. The second measure relates to streamlining of various administrative processes for superannuation funds.

Superannuation funds have been enjoying tax relief on mergers since December 2008. This relief has allowed superannuation funds to defer taxation consequences on gains and losses from revenue and capital assets, that would otherwise arise when transferring to a new merged fund.

This tax relief is seen as an incentive to encourage consolidation in the superannuation industry. Originally introduced as a short-term measure, this tax relief has been extended on various occasions in the past. This new measure will ensure that the tax relief is now available permanently.

Further, the Government has announced administration relief to commence from 1 July 2020, as follows:

  • Superannuation Funds with interests in both the accumulation and retirement phases during an income year will be able to choose their preferred method of calculating exempt current pension income (‘ECPI’)
  • When calculating ECPI using the proportionate method, where all members of the fund are fully in retirement phase for the full income year, superannuation funds will no longer be required to obtain an actuarial certificate (being currently a redundant requirement).

BDO Comment

The tax relief for merging superannuation funds is currently due to cease on 1 July 2020.  It is a welcome relief to see a permanent measure, rather than the continued ‘band-aid’ approach that has been applied in recent years.  This will add certainty to estimated tax outcomes for superannuation funds planning to undertake mergers in future financial years.  It is also good to see the Government trying to reduce red tape by announcing administration relief measures and tidying up redundant provisions.