MySuper outcomes - don't forget the tax (relief)!

The superannuation Bills introduced into Parliament this month will, if enacted, implement more reforms to strengthen Australia’s burgeoning superannuation sector. On this occasion transparency, fund governance and member choice will all be ramped up.

A new ‘outcomes’ test for MySuper plans will require trustees to report publicly each year whether their plans adequately promote member interests or, indeed, whether members would be better off elsewhere! Under-performing plans may need to close – but what about the tax?

MySuper is the closely regulated, no-frills, low-fees super ‘product’ for both employees that choose it and ‘default’ employees that don’t choose any particular investment option in a fund. MySuper was the brainchild of the 2010 Cooper review and MySuper divisions of funds now collectively house nearly $600 billion in funds under management – at 30 June 2017 close to half of APRA regulated super.

Public outcomes reports, a potentially potent extension of the more limited and currently only internal annual ‘scale determinations’, will continue the push of successive Governments for industry consolidation to maximise scale efficiencies.

But how could a trustee recommend effectively a mass-migration of members to another fund, or even to another division of the same fund, if that would bring forward payment of the tax accruing on their accounts? A tax provision still invested is money still earning a return.

The Government introduced a CGT rollover for member transfers into MySuper for exactly this reason. Division 311 rollover relief accommodated compulsory transfers. Equivalent relief will be needed if this new measure is to be effective.

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Authors

Adrian O'Shannessy

Director

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Graham Warren

Special Counsel

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