Members will pay when CGT ends: ASFA

Funds on the threshold of merging have been urged to lobby the government for the continuation of the Capital Gains Tax (CGT) relief for merged funds in order to prevent large amounts being shaved off members’ balances.

Pauline Vamos, chief executive of Association of Superannuation Funds of Australia (ASFA), said the average loss a fund carries into a merger is currently 2.6 per cent. Should the CGT relief be discontinued as of 1 July, 2011, these costs will be passed on to members.

“Which is a lot, particularly off smaller balances,” Vamos said.

“For any funds merging or thinking of merging in the next six-to-12 months please talk to me, or send a letter straight down to Treasury and the minister, explaining how and how much will be shaved off a member’s account if you merge carrying losses,” she added.

Vamos said the Treasury had put an amount of $10 million on the CGT relief, but that ASFA would be going to Canberra again to advocate that the relief was not a revenue item and should not be considered as such.

The issue of extending the CGT relief was one recommendation that was omitted from the Stronger Super reforms, which Vamos said is causing her concern.

“We must not ignore the recommendations that have not been supported by the Government — because they will make the package whole,” she said.

Vamos added that over the coming year, ASFA would be advocating for the inclusion of “important but forgotten” recommendations.