New index measures after-effects of CGT

FTSE Group and the Association of Superannuation Funds of Australia (ASFA) have launched another index measuring the after-effects of tax, adding capital gains tax to an existing series that covers franking credits and off market buy-backs.

The FTSE Group and ASFA announced the expansion of the FTSE ASFA Australia Index Series yesterday, brought about in response to support from superannuation funds for additional industry standard after-tax benchmarks. A benchmark that included capital gains tax would facilitate after-tax assessments on a far more granular level, ASFA stated.

“After-tax reporting is of growing importance, given the Government’s Stronger Super proposals around setting investment strategies with regard to the after-tax outcomes,” said ASFA chief executive, Pauline Vamos. “The outcome of the Stronger Super reforms is to create a set of objective criteria to benchmark superannuation funds. These indices are clearly part of the solution.”

More after-tax benchmarks brought further clarity to market performance and would assist trustees in providing better investment performance for members, she added.

Sunsuper chief investment officer, David Hartley, said that while people focused on fees and costs, it was actually tax that took the biggest amount out of super savings. This assertion was supported by NAB executive general manager, asset servicing, Leigh Watson, who said that the bank’s own analysis showed that tax expenses could comprise 70 per cent of overall expenses for super funds and managed investment schemes.

The new index could also be used as the basis for the creation of index-linked products such as exchange-traded funds, structured products and other derivatives due to its liquid and tradable nature, the group stated.