Private ruling: Loss relief for merging complying superannuation funds
Published: December 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: As trustee of a pooled superannuation trust (PST), and as part of the merger of ABC Superfund with XYZ Superfund, can ABC Ltd (ABC) transfer a proportion of the PST's realised capital losses, representing a proportion of the ABC Fund's (AWF's) accrued realised capital losses, to the XYZ Superfund in accordance with the operation of Division 310 of the Income Tax Assessment Ac t (ITAA 1997)? | A1: Yes. | Q2: Does Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the arrangement? | A2: No.

Relevant facts and circumstances: The relevant funds and their trustees 1. The ABC Superfund and the XYZ Superfund are complying superannuation funds under the Superannuation Industry (Supervision) Act 1993 (SIS Act). 4. The trustee of ABC Superfund is ABC. 5. ABC is also the trustee of the AWF and will continue as the trustee when AWF is converted into a pooled superannuation trust (PST) to be called the ABC PST. 6. The trustee of XYZ Superfund is XYZ Pty Limited (XYZ). The successor fund transfer 7. Under amendments made to the SIS Act to implement the MySuper scheme as part of the Stronger Super package of reforms, registered superannuation entity (RSE) licensees of regulated superannuation funds are required to offer a MySuper product by 1 January 2014 in order to continue to receive contributions from employers on behalf of their employees that do not have a chosen fund. 8. ABC determined that, as the RSE licensee of ABC Superfund, it would not be able to offer a MySuper product by 1 January 2014 and commenced a tender process to merge ABC Superfund with another superannuation fund. At the completion of the tender process, it was agreed that ABC Superfund and XYZ Superfund would undertake a successor fund transfer (SFT) pursuant to the operation of the SIS Act and the Superannuation Industry (Supervision) Regulations 1994 (Cth) (SIS Regulations). 9. A deed of transfer has been executed by the respective trustees to effect the SFT, including the trustees agreeing, as required under the SIS Regulations, to provide ABC Superfund members with equivalent rights to benefits when they become members of the XYZ Superfund. The SFT will take place in the 2014 income year. 10. Pursuant to the SFT, all benefits of members and beneficiaries of the ABC Superfund will be transferred to the XYZ Superfund. At this time, ABC Superfund members will become members of XYZ Superfund. All the assets of ABC Superfund representing the entitlements of ABC Superfund members and beneficiaries will be transferred to the XYZ Superfund. ABC Superfund will be wound up in due course. Capital losses in the AWF 11. ABC currently invests the majority of the assets of the ABC Superfund in AWF, which is a wholesale unregistered unit trust. 12. AWF is a fixed trust subject to the provisions of Division 6 of Part III of the ITAA 1936 with separate asset classes corresponding to the different investment strategies on offer within the AWF. ABC Superfund's unit holding represents a proportion of the units in AWF on issue. AWF generally distributes its income to unitholders every six months. As at 30 June 20XX, AWF has accrued realised capital losses. 13. These capital losses have a recoupment value and therefore represent an asset that can benefit the members of the ABC Superfund. In accordance with its fiduciary obligations ABC is seeking to preserve the value of those accrued capital losses for members of the ABC Superfund on their transfer to XYZ Superfund. The transfer of ABC Super assets to XYZ 14. ABC Superfund's investments as shown in its audited accounts at 30 June 20XX consist of units in AWF, and other investments. 15. Under the SFT, XYZ will acquire the assets of ABC Superfund representing the entitlements of ABC Superfund members and beneficiaries. The transfer of the assets and liabilities of ABC Superfund to XYZ Superfund could be achieved in a number of ways. However XYZ is required to act in a manner consistent with its trust deed and existing investment strategy. At the same time, ABC Superfund is required under the regulatory framework established by the SIS Act and SIS Regulations to ensure that its members achieve the best possible outcome under the SFT. This regulatory requirement is reflected in the terms of the deed of transfer executed by ABC and XYZ. 16. ABC Superfund and XYZ Superfund have agreed that the approach that achieves the best regulatory outcome for members of both funds is to convert AWF to a PST (with APRA's approval) prior to executing the SFT. 17. However, other options were considered. As an alternative the units in AWF could be transferred to the XYZ Superfund. This approach would preserve the potential benefit of the accrued capital losses in AWF. However, while ABC Superfund's members will obtain some future benefit via the distribution of tax free capital gains from AWF, the value of the benefit to those members will be diluted due to XYZ member participation after the SFT. XYZ could potentially convert AWF to a PST after the SFT occurs, however this would result in the same dilution of ABC Superfund's members benefit. The proposed conversion of AWF to ABC PST 18. In order to transfer the assets of ABC Superfund to XYZ Superfund in a way that best meets the interests of the members of both funds, ABC, in its capacity as the trustee of AWF, is seeking to convert AWF into a PST to be called the ABC PST. Pursuant to the operation of subsection 48(5) of the SIS Act, this conversion will be effective from 1 July 2013. 19. This will meet the interests of members of both superannuation funds as follows: · the conversion will allow XYZ Superfund to acquire on transfer the underlying assets of AWF rather than acquiring the ownership of ABC's units in AWF · the conversion will also enable ABC Superfund members to secure some part of the value of the potential asset represented by AWF's accrued capital losses. This will be effected through the recognition of a deferred tax asset (DTA) in the unit price of AWF units, in a manner consistent with the joint APRA and ASIC Unit Pricing - Guide to Good Practice. The trustee of AWF is currently in discussions with the Australian Prudential Regulation Authority (APRA) to facilitate the conversion of the AWF to a PST and to enable ABC to be the trustee of the PST. · the conversion will allow the transferred AWF capital losses to be available to be used for the benefit of transferring Superfund members and beneficiaries immediately upon the SFT. 20. Under SIS Regulation 1.04(5) a trust will be a PST if it is only used for investing the assets of: · regulated superannuation funds; · approved deposit funds; · other PSTs; · virtual PST assets of a life insurance company; and · the segregated exempt assets of the life insurance company. 21. The Trustee must confirm in writing to APRA its intention to have the trust treated as a PST. Under subregulation 1.04(6) of the SIS Regulations the Trustee may give a notice of intention despite anything in the governing rules of the trust. It is also necessary for AWF to be licensed by APRA as a RSE and for the non-superannuation entity investors in AWF to redeem their units before the Trustee gives the notice of its intention for AWF to be treated as a PST. 22. Under section 40 of the SIS Act, APRA may give the Trustee of a PST a written notice that it is a complying PST and will give a copy of any such notice to the ATO. Subsection 48(1) of the SIS Act then provides that a unit trust is only a PST for tax purposes in relation to any year of income if APRA has given the PST a section 40 notice and hasn't withdrawn that notice. Under subsection 48(5) of the SIS Act, a section 40 notice is deemed to have been given at the commencement of the year of income in which it is given and applies for the whole of the income year, or until it is withdrawn by APRA. 23. ABC will lodge the formal notification and application to amend their RSE Licence with APRA as soon as a favourable decision is received from the ATO confirming the ability to transfer the losses from AWF to XYZ Superfund as part of the SFT. On the basis of discussions with their legal adviser, it is ABC's firm expectation that there are no impediments to APRA amending their RSE licence so that ABC is authorised to be the trustee of the ABC PST. 24. ABC has taken the necessary steps to facilitate redemption of non-superannuation fund members units in AWF at a time in the 20YY income year. Once these units are redeemed AWF will satisfy the requirement to be a PST under subregulation 1.04(5) of the SIS Regulations as AWF will only be used for investing the assets of ABC Superfund. 25. AWF has not made any distributions since 30 June 20XX, ie during the 20YY income year. If AWF converts to the ABC PST, the ABC PST will become subject to tax in accordance with Division 295 of the ITAA 1997 in relation to income derived by AWF/ABC PST during the 20YY income year. 26. In determining the value at which incoming ABC Superfund members enter the XYZ Superfund, XYZ intends to include the value of a DTA in AWF. Once this value is passed to the incoming ABC Superfund members on 31 December 20XX, it will not be possible to recoup the amount of DTA included in a member's balance at that time if the ATO were to subsequently disallow the transfer of losses. 27. All assets of AWF are valued at fair market value at close of business on the previous day. This was included in ABC Superfund's unit pricing at dd/mm/20XX. 28. AWF, a managed investment trust where unit-holders are presently entitled to all of its income for a given income year, is not liable to income tax on the net income of AWF. The financial statements of AWF neither recognise an income tax expense in the operating statement nor provide for a provision for tax / deferred tax asset (DTA) in the balance sheet. As such, no asset value is currently placed on AWF's realised capital losses when determining AWF's NAV and consequently, ABC Superfund's unit prices. 29. On the conversion of AWF to a pooled superannuation trust (PST), ABC as trustee of the PST would be liable to income tax on the taxable income of the ABC PST. PST status is determined on a year of income basis. AWF is proposing to become a PST during the 20YY income year just prior to the merger of ABC Superfund and XYZ Superfund. Pursuant to the subsection 48(5) of the SIS Act, AWF will be deemed to be the ABC PST from 1 July 20XX. AWF would therefore be subject to income tax effective 1 July 20XX. This means that AWF would be required to recognise a DTA on its balance sheet for its realised capital losses. The value of the DTA would therefore become reflected in AWF's NAV and consequently in ABC Superfund's unit price (based on its entitlement to those assets). 30. The joint ASIC and APRA Unit Pricing Guide to Good Practice (the Guide) states that "[DTAs] should be included in the unit prices to the extent that they have value for present or future unit holders, taking into account the circumstances of the fund…". The Guide considers that recognising the full value of the DTA, or recognising no DTA are totally inappropriate. The key risk associated with DTAs is the risk of the asset not being realisable, which could result in unit-holders being adversely impacted (depending on their circumstances) if their asset values are understated (where the DTA is not sufficiently recognised) or overstated (where the DTA is over recognised). 31. To manage the risk of the DTA (and NAV) being overstated, trustees of superannuation funds and PSTs are required to determine a cap, or place a limit, on the size of the DTA recognised as an asset within the fund. They are also required to undertake periodic reviews of the appropriateness of the level of the cap. The determination of the DTA cap is usually done through a process of estimating the likely amount of capital gains that could be generated by the fund over a reasonable timeframe, based on long-term capital growth assumptions. The determination of an appropriate DTA cap should therefore be considered having regard to the prevailing circumstances of the individual entity, with the key consideration being the determination of a reasonable time horizon over which recoverability of losses can be assessed. 32. The DTA caps applied within the super fund and PST industry typically ranges from 1% to 4% of the entities net assets. For example, ABC Superfund's present cap is X% and XYZ Superfund's cap is Y%. Each fund's cap has been determined by ABC and XYZ independently and do not take into account any potential impact of the proposed SFT. 33. ABC is yet to conclude on an appropriate DTA cap for AWF upon AWF's conversion to a PST and is currently in the process of reaching an agreement with XYZ. However, ABC currently considers that a DTA between a certain percentage of AWF's net assets would likely be appropriate. Matters being taken into account by ABC in determining this cap include: · the current value of AWF's realised capital losses to members of ABC Superfund. In this regard, the time frame for the potential recoupment of AWF's losses is a significant factor (for example, assuming a 10% annual yield and present rate of contribution growth, it would take a number of years for the losses to be recouped); · the pending transfer of assets and realised capital losses from AWF to XYZ Superfund as part of the merger; and · XYZ Superfund presently has its own realised capital losses and it is anticipated that it will take a number of years for these losses to be recouped. 34. ABC considers that the impact of AWF recognising a DTA following its conversion to a PST is significant for the members of ABC Superfund as it enables them to recognise the true value of their entitlement, but which cannot be presently reflected in unit prices. ABC have provided the figures [based on balances at dd/mm/20XX]. 35. Assuming a cap of Z% is ultimately determined, an amount would be reflected by ABC Superfund as an increase in the value of its investment in AWF on its conversion to a PST. This would immediately flow through into ABC Superfund's unit prices, thereby providing its members with an increase in their entitlement. 36. It has been advised that if no value is given to AWF's realised capital losses, i.e. AWF is not able to convert to a PST, XYZ will allocate to each member of ABC Superfund, on average, XYZ Superfund units to a certain value. However, if AWF converts to a PST as proposed, XYZ will allocate to each member of ABC Superfund, on average, XYZ Superfund units a much greater value. This will enable ABC to fulfil its fiduciary obligation to benefit members of ABC Superfund for the inherent value they currently have in AWF's realised capital losses, which cannot presently be incorporated in the NAV of AWF and its unit prices. 37. Existing XYZ Superfund members would also benefit as a result of the capital losses being transferred and which exceed the DTA cap. This benefit, on average, is estimated by XYZ to be an amount that is significantly less per member. It should be noted that this amount ignores any discount XYZ may apply in taking up the DTA due to its already significant amount of realised capital losses available for recoupment. Timing and limits to the transfer of losses 38. The intended date of transfer of members and assets of ABC Superfund to XYZ Superfund is in the 20YY income year. 39. ABC will limit the transfer of ABC PST's losses to the XYZ Superfund to its proportion.

Relevant legislative provisions: ITAA 1997 section 118-350 | ITAA 1997 Subsection 295-85(2) | ITAA 1997 Section 310-5 | ITAA 1997 Section 310-20 | ITAA 1997 Section 310-25 | ITAA 1997 Section 310-30 | ITAA 1997 subsection 310-35(1) | ITAA 1997 subparagraph 310-35(2)(b) | ITAA 1936 Part IVA

Reasons for decision: Summary: Section 310-5 of the ITAA 1997 states: 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. Broadly Division 310 provides for loss relief in relation to mergers between complying superannuation entities provided certain criteria are satisfied in relation to the merger. Subdivision 310-B provides for a trustee of a transferring entity to choose to transfer losses depending on the nature of the assets held by the original fund just before the arrangement to merge was made. A transferring entity may be the original fund, but does not have to be (subsections 310-15(1) and 310-20(1)) however, each choice under Subdivision 310-1B broadly requires · The original fund be a complying superannuation fund or complying approved deposit fund; · Just before the arrangement to merge was made, the relevant assets were held by the original fund; · At the completion of the merger, the original fund will cease to have any members; and · Any continuing fund must be a complying superannuation fund that is not a small superannuation fund (that is it must have 5 or more members) In the present case · The original fund is ABC Superfund · The continuing fund is XYZ Superfund · ABC is the trustee of ABC PST (who will be the transferring entity under section 310-20). For present purposes we are asked to consider the application of section 310-20 and whether ABC as trustee of the ABC PST can choose to transfer losses under that section. Subsection 310-20(1) states: 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. 'Arrangement' is defined in section 995-1 of the ITAA 1997 to mean any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings. Paragraph 2.13 of the explanatory memorandum accompanying the introduction of Division 310 into the ITAA 1997 provides that The broad term 'arrangement' is used in these provisions as it is not intended to limit the manner in which superannuation entities may merge. Paragraph 2.63 provides further guidance; The arrangement to merge funds covers the transactions under which the assets and members are transferred between the merging funds. It does not include the planning stage, negotiations between the trustees of the funds and preparatory work to implement the arrangement. Therefore, the law is intended to be flexible in how an arrangement is effected but the steps that actually make up the arrangement for the purposes of Division 310 are those more directly connected with the actual transfer of assets or members. Under the proposed scheme upon approval from APRA under the SIS Act, AWF, presently a managed investment trust, will be converted into a PST. This will occur on a date in 20YY income year when the transfer will take place and with ABC the trustee of the PST. At present a proportion of units in AWF are owned by the ABC Superfund which is a complying superannuation fund. The remaining units in AWF are held by non-superannuation entities. The rulees advise that the units held by non-superannuation entities will be redeemed, in accordance with the existing redemption processes provided for in AWF's trust deed. ABC will then confirm in writing to APRA its intention to have the AWF trust treated as a PST. It will be necessary for AWF to be licensed by APRA as a registered superannuation entity (RSE) to be treated as a PST. The conversion of AWF to a PST is a necessary step towards giving effect to the arrangement. However it is not a transaction under which assets or members are transferred from ABC Superfund to XYZ Superfund (i.e. it is not a transfer event). Therefore, in relation to the particular arrangement as described above, it is more appropriate to consider the conversion part of the preparatory stages in implementing the arrangement. Therefore the arrangement that is made for the purposes of Division 310 is the SFT. There are 3 conditions under section 310-20 of the ITAA 1997 which must be satisfied for ABC to be able to transfer the losses of the PST to XYZ Superfund. The conditions are set out in subsections 310-20(2), (3) and (4) of the ITAA 1997. Subsection 310-20(2) of the ITAA 1997 states: 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). The first condition is satisfied as units in AWF, which will by that time be a PST (ABC PST) will be held entirely by ABC Superfund. ABC PST is the transferring entity and ABC Superfund, is a complying superannuation fund. Subsection 310-20(3) of the ITAA 1997states: 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). This second condition is satisfied as the rulees' advise that the ABC Superfund will cease to have any members (within the meaning of the SISA) at a date in the 20YY income year (the completion time), and individuals who cease to be members of ABC Superfund become members of the XYZ Superfund (the continuing fund), which is a complying superannuation fund. Subsection 310-20(4) of the ITAA 1997 states: 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). The third condition in subsection 310-20(4) of the ITAA 1997 is met as paragraph 310-20(4)(a) of the ITAA 1997 is satisfied. The XYZ Superfund is the continuing fund and it is not a small superannuation fund as defined in the ITAA 1997. As the conditions of section 310-20 of the ITAA 1997 are satisfied, ABC can choose to transfer the losses of ABC PST to XYZ Superfund as the continuing fund under that provision. Under the proposed arrangement members of the ABC Superfund will cease to be members of that fund and will become members of the XYZ Superfund. The XYZ Superfund is therefore the continuing fund for the choice for the purposes of Subdivision 310-B of the ITAA 1997 to which losses can be transferred. | Detailed Reasoning - What losses can be transferred?: Section 310-25 of the ITAA 1997 provides an entity choosing to transfer losses can choose to transfer any or all of its losses set out in section 310-30 of the ITAA 1997 in whole or in part to certain entities including, under paragraph 310-25(a) of the ITAA 1997, a continuing fund for the choice. ABC has indicated that it will transfer a proportion of the net capital losses of the ABC PST representing a proportion of the net capital losses of AWF as at 31 December 20XX to XYZ Superfund. The losses that may be transferred are set out in section 310-30 of the ITAA 1997. Under paragraphs 310-30(3)(a) and (b) of the ITAA 1997 these losses include the net capital losses for income years earlier than the completion time as well as net capital losses that would have been made for the transfer year were the transfer year to have ended at the completion time. These losses are respectively referred to as the 'earlier year net capital loss' and 'transfer year net capital loss'. Under the proposed scheme the completion time, being the time that the original fund ceases to have any members, is 31 December 20XX. The transfer year, being the income year that includes the completion time, will be the 20YY income year. In accordance with paragraph 310-30(3)(a) of the ITAA 1997 the carried forward net capital losses of AWF up to and including the 20XX income year will be the earlier year net capital losses that may be transferred. In accordance with paragraph 310-30(3)(b) of the ITAA 1997 the net capital loss incurred in the 20YY income year up to 31 December 20XX will be the transfer year net capital loss that may be transferred. The previously realised net capital loss for an income year that is not the transfer year will be taken, if it is transferred, not to have been made by the transferring entity and amount equal to the loss will be taken to have been made by the continuing entity for that income year under subsection 310-35(1) of the ITAA 1997. A transferring entity can transfer net capital losses from the transfer income year to a continuing entity by reducing these capital losses by the amount transferred under subparagraph 310-35(2)(b) of the ITAA 1997. The net capital losses of ABC PST are losses included in section 310-30 of the ITAA 1997, therefore ABC can choose to transfer these losses to XYZ Superfund under section 310-25 of the ITAA 1997. Division 310 of the ITAA 1997 therefore operates to allow the transfer of a proportion of capital losses from ABC Fund (AWF) to XYZ Pty Limited (XYZ) on the transfer of ABC Superfund to XYZ superfund. | Summary: Part IVA of the ITAA 1936 does not apply to the transfer of losses from ABC PST to XYZ pursuant Division 310 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Part IVA only applies where a scheme has been entered into or carried out to obtain a tax benefit and it can be concluded that the dominant purpose of entering the scheme was to obtain a tax benefit. For the purposes of considering Part IVA of the ITAA 1936, it was concluded that the scheme would be the conversion of AWF to a PST and the successor fund transfer between ABC Superfund and XYZ Superfund. There is a tax benefit under paragraph 177C(1)(ba) of the ITAA 1936. The proposed transfer of a proportion of realised capital losses belonging to the ABC PST to the taxpayer, the XYZ Superfund, will be a capital loss in the year of transfer that would not have been incurred by XYZ Superfund if the scheme had not been carried out and is therefore a tax benefit. There is a further tax benefit under paragraph 177C(1)(a) of the ITAA 1936. If the scheme is implemented the ABC Superfund will hold units in the ABC PST. By the operation of subsection 295-85(2) of the ITAA 1997 and section 118-350 of the ITAA 1997, any gain from disposal of the units in a PST is not included in ABC Superfund's assessable income. This is an amount that would have been expected to have been included in ABC Superfund's assessable income if the scheme had not been carried out and is therefore a tax benefit. | Detailed Reasoning - Sole or dominant purpose: The merging of ABC and XYZ Superfunds is clearly motivated by superannuation regulatory reform. Under the MySuper legislation, superannuation funds are required to offer a MySuper product by 1 January 2014 in order to continue to receive contributions from employers on behalf of their employees that do not have a chosen fund. ABC determined it would not be able to offer a MySuper option by 1 January 2014, and therefore it would not be able to receive contributions from employers on behalf of their employees after this time. ABC Superfund was therefore faced with the situation where it had to find a way to continue to meet the needs of its members in a manner that was not detrimental to their interests. Practically, in order to ensure that it did not breach any regulatory requirements, ABC Superfund was required to merge with another fund in a manner that preserved the value of the member's benefits as much as possible pursuant to its regulatory and fiduciary duties as trustee. An arrangement whereby AWF converts to a PST and then transfers its losses to XYZ Superfund was determined to produce the best regulatory outcome with ABC Superfund transferring its members to XYZ Superfund in a manner that preserves the existing benefits of members as much as possible and ensures that the value of members and beneficiaries entitlements is maximised. The benefit is ultimately not a benefit to XYZ but one for members and beneficiaries and directly relates to the value of their entitlements. It was the changes introduced by the MySuper legislation that drove the need for ABC Superfund to enter into the arrangement. Further, ABC's and XYZ's regulatory and fiduciary responsibilities to their respective members and beneficiaries defined the approach that was to be undertaken in executing the SFT. Further, in accordance with section 310-25 of the ITAA 1997, only a proportion of the losses will be transferred, reflecting the current shareholding of ABC Superfund in AWF. Accordingly, in light of the above circumstances, it is considered that the scheme, being the conversion of AWF to a PST and the SFT was not carried out for the sole or dominant purpose of obtaining a tax benefit for ABC Superfund or XYZ Superfund. Rather, the merger of the ABC and XYZ superannuation funds was in order to meet regulatory reforms and ABC's fiduciary obligation to protect its members' benefits. Therefore, Part IVA does not apply to the transfer of losses from ABC PST to XYZ Superfund pursuant to the operation of Division 310 of the ITAA 1997 and reflecting losses realised by AWF.