Tax Aware Investment Management by Public Offer Superannuation Funds in Australia: Attitudes, Practices and Expectations

Abstract

The Superannuation Industry Supervision Act 1993 (Cth) (the SIS Act) has been amended from 1 July 2013 to require the trustees of Australian superannuation funds to have regard and consider the taxation consequences of their investment strategy. In spite of the literature strongly supporting the benefits of taking tax into account when investing (Tax Aware Investment Management, TAIM) by funds, the extent to which negative perceptions existed about TAIM were unclear. This study was directed at exploring the attitudes, practices and expectations of Chief Investment Officers (CIOs) of public offer superannuation funds in respect of TAIM and in the context of the recent reform. Semi-structured interviews were conducted with 22 CIOs. It was found that they rejected all negative reasons for not utilising TAIM. More importantly, the CIOs were supportive of TAIM and felt that any views to the contrary were not theirs. The CIOs did already practice limited TAIM methods with respect to Capital Gains Tax and imputation credits, and they expected little change in the way that they manage their funds from 1 July 2013.