POWERED BY MOMENTUM MEDIA
Deloitte supports capital gains tax rollover relief extension
The three-month extension of the capital gains tax (CGT) rollover relief is a win for trustees seeking to partner with a larger fund, but fund mergers are not the be-all-and-end-all of capturing scale benefits.
That's according to Deloitte Australia partner Wayne Walker, who said Deloitte supported the Cooper Review's conclusion "that there were clear, demonstrable, and substantial scale benefits "whereby larger super funds could generally deliver equivalent performance at a lower cost to members" than smaller funds.
"Without this relief, those funds intending to merge could only do so if they were prepared to effectively write off their deferred tax assets," he said.
"These assets are substantial for many funds and can amount to as much as 2 per cent or even more, of total fund assets. To write this off is a major decision that in the short term would translate into lower account balances for those members changing funds."
Walker said he also supported the Government's decision to not mandate a threshold fund size that would constitute a fund merger, arguing that mergers are not the only avenue for capturing scale benefits.
It is possible for small- to -medium sized funds to access scale through partnerships with service providers including administrators, asset managers and insurers.
This approach has the added benefit of maintaining a fund's focus on meeting the specific needs of a relatively small target market, Walker added.
Walker said that in spite of the extension to the CGT relief, it was still important for a super fund to regularly and objectively assess its competitive position on a case-by-case basis.
Evidence is mixed on whether larger funds do deliver superior net long-term returns to members than smaller funds, Deloitte stated.
"What is certain is that the investment strategy decisions taken by trustees and their advisers have the potential to far outweigh scale benefits," Walker said.
AUTHOR
Staff Writer
Money Management staff writers are writers who contribute to the website from time to time. If you would like to discuss the content contained within this article please contact us.
Recommended for you
A member body representing some prominent wealth managers is concerned super funds’ dominance is sidelining small companies in capital markets.
Earlier this month, several Australian superannuation funds fell victim to credential stuffing attacks, which saw a small number of members lose more than $500,000.
Small- to medium-sized funds have become collateral damage in an "imperfect" model for super industry levies, a financial institution has said.
Big business has joined the chorus of opposition against the proposed Division 296 tax.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
93.34 3 y p.a(%)
2
Global X GlobalX FANG+ ETF
37.15 3 y p.a(%)
3
GAM LSA Private Shares AU I
33.96 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
29.68 3 y p.a(%)
5
Plato Global Alpha A
28.73 3 y p.a(%)
