diff --git a/news/496.bugfix b/news/496.bugfix
new file mode 100644
index 000000000..bb74ba65c
--- /dev/null
+++ b/news/496.bugfix
@@ -0,0 +1 @@
+Fix merge when element type is a Structured Config
diff --git a/omegaconf/basecontainer.py b/omegaconf/basecontainer.py
index 12669a287..0767533c3 100644
--- a/omegaconf/basecontainer.py
+++ b/omegaconf/basecontainer.py
@@ -349,15 +349,12 @@ def expand(node: Container) -> None:
                     dest_node = dest._get_node(key)
 
             if (
-                is_structured_config(dest._metadata.element_type)
+                dest_node is None
+                and is_structured_config(dest._metadata.element_type)
                 and not missing_src_value
             ):
-                if OmegaConf.is_none(dest, key) or OmegaConf.is_missing(dest, key):
-                    dest[key] = DictConfig(
-                        content=dest._metadata.element_type, parent=dest
-                    )
-                else:
-                    dest[key] = DictConfig(content=dest_node, parent=dest)
+                # merging into a new node. Use element_type as a base
+                dest[key] = DictConfig(content=dest._metadata.element_type, parent=dest)
                 dest_node = dest._get_node(key)
 
             if dest_node is not None:
diff --git a/tests/test_merge.py b/tests/test_merge.py
index 9e117fa6c..8aabe45db 100644
--- a/tests/test_merge.py
+++ b/tests/test_merge.py
@@ -38,8 +38,8 @@
 @pytest.mark.parametrize(
     ("merge_function", "input_unchanged"),
     [
-        (OmegaConf.merge, True),
-        (OmegaConf.unsafe_merge, False),
+        pytest.param(OmegaConf.merge, True, id="merge"),
+        pytest.param(OmegaConf.unsafe_merge, False, id="unsafe_merge"),
     ],
 )
 @pytest.mark.parametrize(
@@ -181,23 +181,42 @@
             id="inter:node_over_node_interpolation",
         ),
         # Structured configs
-        (
+        pytest.param(
             (DictConfig({}, element_type=User), {"user007": {"age": 99}}),
             {"user007": {"name": "???", "age": 99}},
+            id="dict:merge_into_sc_element_type:expanding_new_element",
         ),
-        (
+        pytest.param(
             (
                 DictConfig({"user007": "???"}, element_type=User),
                 {"user007": {"age": 99}},
             ),
             {"user007": {"name": "???", "age": 99}},
+            id="dict:merge_into_sc_element_type:into_missing_element",
         ),
-        (
+        pytest.param(
             (
                 DictConfig({"user007": User("bond", 7)}, element_type=User),
                 {"user007": {"age": 99}},
             ),
             {"user007": {"name": "bond", "age": 99}},
+            id="dict:merge_into_sc_element_type:merging_with_existing_element",
+        ),
+        pytest.param(
+            (
+                DictConfig({"user007": "???"}, element_type=User),
+                {"user007": {"age": 99}},
+            ),
+            {"user007": {"name": "???", "age": 99}},
+            id="dict:merge_into_sc_element_type:merging_into_missing",
+        ),
+        pytest.param(
+            (
+                DictConfig({"user007": None}, element_type=User),
+                {"user007": {"age": 99}},
+            ),
+            {"user007": {"name": "???", "age": 99}},
+            id="dict:merge_into_sc_element_type:merging_into_none",
         ),
         (({"user": User}, {}), {"user": User(name=MISSING, age=MISSING)}),
         (({"user": User}, {"user": {}}), {"user": User(name=MISSING, age=MISSING)}),