The .gitattributes template is defined like this:

# Unity files
*.meta -text -merge=unityamlmerge
*.unity -text -merge=unityamlmerge
*.asset -text -merge=unityamlmerge
*.prefab -text -merge=unityamlmerge

...which is wrong, as -merge disables the merge tool (essentially making the whole thing a no-op).

Where it should be this:

# Unity files
*.meta -text merge=unityamlmerge diff
*.unity -text merge=unityamlmerge diff
*.asset -text merge=unityamlmerge diff
*.prefab -text merge=unityamlmerge diff

-text tells git not to do eol conversions, and diff tells git that these are text files that it can generate patches for