Tax Laws Amendment (2009 Measures No. 6) Act 2010 (19 of 2010)
Schedule 2 Loss relief for merging superannuation funds
Part 1 Main amendment
Income Tax Assessment Act 1997
1 At the end of Part 3-30
Add:
Division 310 - Loss relief for merging superannuation funds
Table of Subdivisions
Guide to Division 310
310-A Object of this Division
310-B Choice to transfer losses
310-C Consequences of choosing to transfer losses
310-D Choice for assets roll-over
310-E Consequences of choosing assets roll-over
310-F Choices
Guide to Division 310
310-1 What this Division is about
This Division sets out special rules for certain merging superannuation funds. These rules relate to the transfer of losses, the treatment of CGT events related to the merger and the treatment of assets related to the merger.
Note 1: This Division applies only to mergers happening between 24 December 2008 and 30 June 2011 (see Part 3 of Schedule 2 to the Tax Laws Amendment (2009 Measures No. 6) Act 2010).
Note 2: This Division and associated provisions will be repealed on 1 July 2013 (see Parts 4 and 5 of that Schedule).
Operative provisions
Subdivision 310-A - Object of this Division
310-5 Object
The main object of this Division is to facilitate the consolidation of the superannuation industry by allowing certain merging *superannuation funds to retain the value, for income tax purposes, of certain losses that might otherwise cease to be able to be utilised as a result of the merger.
Subdivision 310-B - Choice to transfer losses
Table of sections
310-10 Original fund's assets extend beyond life insurance policies and units in pooled superannuation trusts
310-15 Original fund's assets include a complying superannuation/FHSA life insurance policy
310-20 Original fund's assets include units in a pooled superannuation trust
310-10 Original fund's assets extend beyond life insurance policies and units in pooled superannuation trusts
(1) A trustee of:
(a) a *complying superannuation fund (the transferring entity or the original fund ); or
(b) a *complying approved deposit fund (the transferring entity or the original fund );
can choose to transfer losses if an *arrangement is made for which the conditions in this section are satisfied.
Transferring entity's assets include other assets
(2) The first condition is satisfied if, just before the *arrangement was made, the transferring entity's assets included assets other than:
(a) a *complying superannuation/FHSA life insurance policy; or
(b) units in a *pooled superannuation trust.
Note: Other entities may also choose under this Subdivision to transfer losses, for the same arrangement, if the transferring entity holds a complying superannuation/FHSA life insurance policy or units in a pooled superannuation trust.
Original fund's members transfer to a continuing fund
(3) The second condition is satisfied if, under the *arrangement:
(a) the transferring entity ceases to have any members (within the meaning of the Superannuation Industry (Supervision) Act 1993) at a particular time (the completion time ); and
(b) the individuals who cease to be members (within the meaning of that Act) of the transferring entity become members (within the meaning of that Act) of one or more *complying superannuation funds (the continuing funds ).
Continuing funds will usually not be able to be small funds
(4) The third condition is satisfied if either:
(a) none of the continuing funds was a *small superannuation fund, and all existed, just before the *arrangement was made; or
(b) the following subparagraphs apply:
(i) only one of the continuing funds either was a small superannuation fund, or did not exist, just before the arrangement was made;
(ii) under the arrangement, a *complying superannuation fund or *complying approved deposit fund, other than the original fund, ceases to have any members (within the meaning of the Superannuation Industry (Supervision) Act 1993);
(iii) under the arrangement, the individuals who cease to be members (within the meaning of that Act) of that other fund become members (within the meaning of that Act) of the continuing fund;
(iv) either the other fund or the original fund was not a small superannuation fund just before the arrangement was made;
(v) the continuing fund is not a small superannuation fund just after the earliest time when both the other fund and the original fund cease to have any members (within the meaning of that Act).
Ignore members who cannot transfer to a continuing fund
(5) For the purposes of subsections (3) and (4), ignore an individual who remains a member of a *complying superannuation fund or *complying approved deposit fund because of circumstances beyond the control of the trustee of that fund.
310-15 Original fund's assets include a complying superannuation/FHSA life insurance policy
(1) A *life insurance company (the transferring entity ) can choose to transfer losses if an *arrangement is made for which the conditions in this section are satisfied.
Original fund holds a complying superannuation/FHSA life insurance policy
(2) The first condition is satisfied if, just before the *arrangement was made, a *complying superannuation/FHSA life insurance policy issued by the transferring entity was held by:
(a) a *complying superannuation fund (the original fund ); or
(b) a *complying approved deposit fund (the original fund ).
Note: Other entities may also choose under this Subdivision to transfer losses, for the same arrangement, if the original fund holds other assets.
Original fund's members transfer to a continuing fund
(3) The second condition is satisfied if, under the *arrangement:
(a) the original fund ceases to have any members (within the meaning of the Superannuation Industry (Supervision) Act 1993) at a particular time (the completion time ); and
(b) the individuals who cease to be members (within the meaning of that Act) of the original fund become members (within the meaning of that Act) of one or more *complying superannuation funds (the continuing funds ).
Continuing funds will usually not be able to be small funds
(4) The third condition is satisfied if either:
(a) none of the continuing funds was a *small superannuation fund, and all existed, just before the *arrangement was made; or
(b) the following subparagraphs apply:
(i) only one of the continuing funds either was a small superannuation fund, or did not exist, just before the arrangement was made;
(ii) under the arrangement, a *complying superannuation fund or *complying approved deposit fund, other than the original fund, ceases to have any members (within the meaning of the Superannuation Industry (Supervision) Act 1993);
(iii) under the arrangement, the individuals who cease to be members (within the meaning of that Act) of that other fund become members (within the meaning of that Act) of the continuing fund;
(iv) either the other fund or the original fund was not a small superannuation fund just before the arrangement was made;
(v) the continuing fund is not a small superannuation fund just after the earliest time when both the other fund and the original fund cease to have any members (within the meaning of that Act).
Ignore members who cannot transfer to a continuing fund
(5) For the purposes of subsections (3) and (4), ignore an individual who remains a member of a *complying superannuation fund or *complying approved deposit fund because of circumstances beyond the control of the trustee of that fund.
310-20 Original fund's assets include units in a pooled superannuation trust
(1) A trustee of a *pooled superannuation trust (the transferring entity ) can choose to transfer losses if an *arrangement is made for which the conditions in this section are satisfied.
Units in the trust were held by the original fund
(2) The first condition is satisfied if, just before the *arrangement was made, units in the transferring entity were held by:
(a) a *complying superannuation fund (the original fund ); or
(b) a *complying approved deposit fund (the original fund ).
Note: Other entities may also choose under this Subdivision to transfer losses, for the same arrangement, if the original fund holds other assets.
Original fund's members transfer to a continuing fund
(3) The second condition is satisfied if, under the *arrangement:
(a) the original fund ceases to have any members (within the meaning of the Superannuation Industry (Supervision) Act 1993) at a particular time (the completion time ); and
(b) the individuals who cease to be members (within the meaning of that Act) of the original fund become members (within the meaning of that Act) of one or more *complying superannuation funds (the continuing funds ).
Continuing funds will usually not be able to be small funds
(4) The third condition is satisfied if either:
(a) none of the continuing funds was a *small superannuation fund, and all existed, just before the *arrangement was made; or
(b) the following subparagraphs apply:
(i) only one of the continuing funds either was a small superannuation fund, or did not exist, just before the arrangement was made;
(ii) under the arrangement, a *complying superannuation fund or *complying approved deposit fund, other than the original fund, ceases to have any members (within the meaning of the Superannuation Industry (Supervision) Act 1993);
(iii) under the arrangement, the individuals who cease to be members (within the meaning of that Act) of that other fund become members (within the meaning of that Act) of the continuing fund;
(iv) either the other fund or the original fund was not a small superannuation fund just before the arrangement was made;
(v) the continuing fund is not a small superannuation fund just after the earliest time when both the other fund and the original fund cease to have any members (within the meaning of that Act).
Ignore members who cannot transfer to a continuing fund
(5) For the purposes of subsections (3) and (4), ignore an individual who remains a member of a *complying superannuation fund or *complying approved deposit fund because of circumstances beyond the control of the trustee of that fund.
Subdivision 310-C - Consequences of choosing to transfer losses
Table of sections
310-25 Who losses can be transferred to
310-30 Losses that can be transferred
310-35 Effect of transferring a net capital loss
310-40 Effect of transferring a tax loss
310-25 Who losses can be transferred to
An entity choosing under Subdivision 310-B to transfer losses can choose to transfer any or all of the transferring entity's losses set out in section 310-30, in whole or in part, to one or more of the following entities (a receiving entity ):
(a) a continuing fund for the choice;
(b) a *pooled superannuation trust in which units are held by a continuing fund for the choice just after the completion time;
(c) a *life insurance company with which a *complying superannuation/FHSA life insurance policy is held by a continuing fund for the choice just after the completion time.
310-30 Losses that can be transferred
(1) The transferring entity's losses that can be transferred are:
(a) any of its *net capital losses for income years earlier than the income year for the transferring entity that includes the completion time (the transfer year ), to the extent that it was not *utilised before the completion time (an earlier year net capital loss ); and
(b) any net capital loss it would have made for the transfer year were the transfer year to have ended at the completion time (a transfer year net capital loss ); and
(c) any of its *tax losses for income years earlier than the transfer year, to the extent that it was not utilised before the completion time (an earlier year tax loss ); and
(d) any tax loss it would have incurred for the transfer year were the transfer year to have ended at the completion time (a transfer year tax loss );
worked out subject to the modifications set out in this section.
Note: If the entity choosing to transfer losses also chooses an asset roll-over under Subdivision 310-D for the same arrangement, none of the transfer events for the roll-over will contribute towards a loss transferred under this Subdivision (see subsections 310-55(1), 310-60(3), 310-65(1) and 310-70(1)).
(2) For a choice under section 310-15 (life insurance companies), work out those losses by only considering the following to the extent that they relate to assets reasonably attributable to a *complying superannuation/FHSA life insurance policy issued by the transferring entity and held by the original fund:
(a) *capital gains from *complying superannuation/FHSA assets;
(b) *capital losses from complying superannuation/FHSA assets;
(c) assessable income covered by subsection 320-137(2) (about complying superannuation/FHSA assets);
(d) deductions covered by subsection 320-137(4) (about complying superannuation/FHSA assets).
(3) For a choice under section 310-20 (pooled superannuation trusts), work out those losses by only considering *capital gains, *capital losses, assessable income and deductions to the extent that they relate to assets reasonably attributable to units in the transferring entity held by the original fund.
310-35 Effect of transferring a net capital loss
(1) To the extent that an earlier year net capital loss is transferred to a receiving entity:
(a) the transferring entity is taken not to have made the loss for that earlier income year; and
(b) an amount equal to the transferred amount is taken to be:
(i) if the receiving entity is a *life insurance company - a *capital loss from *complying superannuation/FHSA assets made by the receiving entity for that earlier year; and
(ii) otherwise - a capital loss made by the receiving entity for that earlier year.
(2) To the extent that a transfer year net capital loss is transferred to a receiving entity:
(a) if the transferring entity is a *life insurance company - the sum of the transferring entity's *capital losses from *complying superannuation/FHSA assets for the transfer year is reduced by an amount equal to the transferred amount; and
(b) if the transferring entity is not a life insurance company - the sum of the transferring entity's capital losses for the transfer year is reduced by an amount equal to the transferred amount; and
(c) if the receiving entity is a life insurance company - an amount equal to the transferred amount is taken to be a capital loss from complying superannuation/FHSA assets made by the receiving entity for the transfer year; and
(d) if the receiving entity is not a life insurance company - an amount equal to the transferred amount is taken to be a capital loss made by the receiving entity for the transfer year.
310-40 Effect of transferring a tax loss
(1) To the extent that an earlier year tax loss is transferred to a receiving entity:
(a) the transferring entity is taken not to have incurred the loss for that earlier income year; and
(b) an amount equal to the transferred amount is taken to be:
(i) if the receiving entity is a *life insurance company - a *tax loss of the *complying superannuation/FHSA class incurred by the receiving entity for that earlier year; and
(ii) otherwise - a tax loss incurred by the receiving entity for that earlier year.
(2) To the extent that a transfer year tax loss is transferred to a receiving entity:
(a) if the transferring entity is a *life insurance company - the sum of the transferring entity's deductions covered by subsection 320-137(4) (about complying superannuation/FHSA assets) for the transfer year is reduced by an amount equal to the transferred amount; and
(b) if the transferring entity is not a life insurance company - the sum of the transferring entity's deductions for the transfer year is reduced by an amount equal to the transferred amount; and
(c) if the receiving entity is a life insurance company - an amount equal to the transferred amount is taken to be a *tax loss of the *complying superannuation/FHSA class incurred by the receiving entity for the transfer year; and
(d) if the receiving entity is not a life insurance company - an amount equal to the transferred amount is taken to be a tax loss incurred by the receiving entity for the transfer year.
Subdivision 310-D - Choice for assets roll-over
Table of sections
310-45 Choosing the assets roll-over
310-45 Choosing the assets roll-over
(1) An entity can choose a roll-over under this Subdivision if:
(a) the entity makes or could make a choice under Subdivision 310-B (the losses choice ) to transfer the losses of an entity (the transferring entity ); and
(b) the conditions in this section are satisfied for the *arrangement to which the losses choice relates.
(2) The first condition is that, under the *arrangement, one or more *CGT events (the transfer events ) happen in relation to the following assets (the original assets ) of the transferring entity with the result that it ceases to own those assets:
(a) for a losses choice under section 310-10 (original funds) - all of its *CGT assets;
(b) for a losses choice under section 310-15 (life insurance companies) - all of its CGT assets reasonably attributable to the *complying superannuation/FHSA life insurance policy held by the original fund for the losses choice just before the arrangement was made;
(c) for a losses choice under section 310-20 (pooled superannuation trusts) - all of its CGT assets reasonably attributable to the units in that entity held by the original fund for the losses choice just before the arrangement was made.
(3) The second condition is that the transfer events all happen in the income year (the transfer year ) for the transferring entity that includes the completion time for the losses choice.
(4) The third condition is that, for each transfer event, an asset (the received asset ) becomes an asset of one of the following (the receiving entity ) as a result of the event:
(a) a continuing fund for the losses choice;
(b) a *pooled superannuation trust in which units are held by a continuing fund for the losses choice just after the completion time;
(c) a *life insurance company with which a *complying superannuation/FHSA life insurance policy is held by a continuing fund for the losses choice just after the completion time.
(5) For the purposes of subsection (2), ignore any *CGT assets retained by the transferring entity:
(a) to pay its existing or expected debts relating to the *arrangement; or
(b) to meet its liabilities relating to individuals who have remained members (within the meaning of the Superannuation Industry (Supervision) Act 1993) of the original fund because of circumstances beyond the control of the trustee of that fund.
310-50 Choosing the form of the assets roll-over
(1) For those of the original assets that are not *revenue assets, the form of the roll-over is worked out as follows:
Method statement
Step 1. For the transfer events relating to those original assets:
(a) add up any *capital losses of the transferring entity for the events; and
(b) subtract any *capital gains of the transferring entity for the events.
Step 2. If the result of step 1 is more than zero, the entity choosing the roll-over can choose either section 310-55 (global asset approach) or 310-60 (individual asset approach) to apply to those assets and the corresponding received assets.
Step 3. Otherwise, section 310-60 (individual asset approach) applies to those original assets and the corresponding received assets.
(2) For those of the original assets that are *revenue assets, the form of the roll-over is worked out as follows:
Method statement
Step 1. For the transfer events relating to those original assets:
(a) add up any amounts the transferring entity would be able to deduct as a result of the events; and
(b) subtract any amounts that would be included in the transferring entity's assessable income as a result of the events.
Step 2. If the result of step 1 is more than zero, the entity choosing the roll-over can choose either section 310-65 (global asset approach) or 310-70 (individual asset approach) to apply to those assets and the corresponding received assets.
Step 3. Otherwise, section 310-70 (individual asset approach) applies to those original assets and the corresponding received assets.
Subdivision 310-E - Consequences of choosing assets roll-over
Table of sections
310-55 CGT assets - if global asset approach chosen
310-60 CGT assets - individual asset approach
310-65 Revenue assets - if global asset approach chosen
310-70 Revenue assets - individual asset approach
310-75 Further consequences for roll-overs involving life insurance companies
310-55 CGT assets - if global asset approach chosen
Consequences for transferring entity
(1) For each of the original assets to which this section applies, the transferring entity's *capital proceeds from the relevant transfer event are taken to be an amount equal to:
(a) if, apart from this subsection, the event would result in a *capital gain - the asset's *cost base just before the event; or
(b) if, apart from this subsection, the event would result in a *capital loss - the asset's *reduced cost base just before the event.
Note: This section only applies if it is chosen to apply under subsection 310-50(1).
Consequences for receiving entity
(2) For each of the received assets to which this section applies, the first element of the *cost base of the asset (in the hands of the receiving entity) is taken to be an amount equal to the cost base of the corresponding original asset just before the relevant transfer event.
(3) For each of the received assets to which this section applies, the first element of the *reduced cost base of the asset (in the hands of the receiving entity) is taken to be an amount equal to the reduced cost base of the corresponding original asset just before the relevant transfer event.
310-60 CGT assets - individual asset approach
Consequences for transferring entity
(1) The transferring entity may disregard any *capital loss for a transfer event relating to an original asset to which this section applies.
Note: This section does not apply if section 310-55 (global asset approach) is chosen to apply under subsection 310-50(1).
(2) Subsections (3), (4) and (5) apply if under subsection (1) the transferring entity disregards a *capital loss for a transfer event relating to an original asset.
(3) The transferring entity's *capital proceeds from the transfer event are taken to be an amount equal to the *reduced cost base of the original asset just before the event.
Consequences for receiving entity
(4) The first element of the *cost base of the corresponding received asset (in the hands of the receiving entity) is taken to be an amount equal to the cost base of the original asset just before the event.
(5) The first element of the *reduced cost base of the corresponding received asset (in the hands of the receiving entity) is taken to be an amount equal to the reduced cost base of the original asset just before the event.
310-65 Revenue assets - if global asset approach chosen
(1) For each of the original assets to which this section applies, the transferring entity's gross proceeds for the relevant transfer event are taken to be the amount (the deemed proceeds ) the transferring entity would need to have received in order to have a nil profit and nil loss for the event.
Note: This section only applies if it is chosen to apply under subsection 310-50(2).
(2) For each of the received assets to which this section applies, the receiving entity is taken, for the purposes of this Act, to have paid an amount for that asset at the time of the transfer event that is equal to the deemed proceeds for the corresponding original asset.
310-70 Revenue assets - individual asset approach
(1) If the transferring entity incurs a *tax loss for a transfer event relating to an original asset to which this section applies, the entity choosing the roll-over can choose for the transferring entity's gross proceeds for the event to be taken to be the amount (the deemed proceeds ) the transferring entity would need to have received in order to have a nil profit and nil loss for the event.
Note: This section does not apply if section 310-65 (global asset approach) is chosen to apply under subsection 310-50(2).
Consequences for receiving entity
(2) If a choice is made under subsection (1), the receiving entity is taken to have paid an amount for the corresponding received asset at the time of the transfer event that is equal to the deemed proceeds for the event.
310-75 Further consequences for roll-overs involving life insurance companies
(1) Section 320-200 (about consequences of transferring assets to or from a complying superannuation/FHSA asset pool) does not apply for a transfer event for the roll-over if either the transferring entity or the receiving entity is a *life insurance company.
(2) If the receiving entity for the roll-over is a *life insurance company, each received asset of that entity is taken:
(a) to be a *complying superannuation/FHSA asset of that entity; and
(b) not to be, in whole or in part, a *life insurance premium.
Subdivision 310-F - Choices
Table of sections
310-85 Choices
310-85 Choices
(1) A choice under this Division must be made:
(a) by the day the transferring entity's *income tax return is lodged for the transfer year for the entity; or
(b) within a further time allowed by the Commissioner.
(2) The way the transferring entity's *income tax return is prepared is sufficient evidence of the making of the choice.