The Federal Government has announced it will provide income tax relief for default super fund members who are mandatorily transferred to another fund under MySuper reforms.
Under the reforms, default members’ account balances may be transferred in the event that a fund does not offer a MySuper product – and this may create an income tax liability from the realisation of fund assets or crystalise losses within the member’s fund.
Under the proposed legislation these two liabilities would be also transferred with the account balance to a new MySuper product in the event of a mandatory transfer, with the relief also being extended to life insurance companies and pooled superannuation trusts.
According to the exposure draft of the legislation and explanatory material which the Federal Government released yesterday, the purpose of the changes to the Income Tax Assessment Act 1997 is to prevent “the value of the losses remaining with the transferring fund and protects the value of the accrued default amount of affected members”.
While MySuper will come into effect on 1 July 2013, superannuation funds will have up to four years to make any necessary transfers, in line with the deadline for the transfer of default member’s accrued funds to a MySuper product.
The Federal Government is seeking submissions on the legislation by May 3.
