Australia Extends Super Fund Loss Relief

by Mary Swire, Tax-News.com, Hong Kong

27 July 2011

The Australian government has developed draft legislation to implement an extension to the temporary loss relief for superannuation funds that are currently in the process of merging, and has issued an exposure draft of the legislation and explanatory material.

The temporary loss relief was introduced in response to the uncertain financial market conditions faced by superannuation funds in late 2008. The loss relief allows funds to transfer losses when they merge that would otherwise be extinguished when the merging fund is wound up. These losses are valuable because they can then be offset against capital gains in future years.

The three-month extension was provided in recognition of the complexity of the larger superannuation fund mergers that are already in progress. The existing requirement for the loss relief that mergers must be completed within a single income year will also be relaxed to allow affected funds to benefit from the extension.

The government does not intend to provide any further extensions of this temporary loss relief or to make it permanent. However, it announced as part of the 'Stronger Super' reforms that it supports in principle appropriate loss relief for superannuation funds required by the Australian Prudential Regulation Authority to merge in order to meet new licensing conditions.

The consultation on the exposure draft package ends August 11, 2011.

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