In December last year, the Australian Taxation Office (ATO) announced that on 1 July 2024, super funds and IDPS operators will no longer be able to claim a Reduced Input Tax Credit (RITC) on behalf of members for advice fees collected by the platform.
Speaking on the upcoming changes at the FAAA Roadshow in Sydney last week, FAAA general manager policy, advocacy and standards Phil Anderson said the current fee structure has allowed clients to reduce costs but “now that’s going to disappear; the ATO wants to pull it”.
“We’ve certainly been advocating on that issue,” he added.
The RITC removal will see the current 75 per cent discount on GST to clients advice fees removed, raising the GST charged from 2.5 per cent to 10 per cent and resulting in a 7.3 per cent increase on total fees charged to the client.
Importantly, there will be no change in the fees that advisers charge their clients, only in the amount they actually have to pay.
In a letter to its members, Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston urged advisers to discuss the upcoming rate changes with their clients and encouraged them to voice their displeasure with the government for increasing the cost of advice.
“This is one of those tax hikes that quietly flies under the radar … but we need to expose it to consumers, starting with your clients,” Johnston said.
“This is yet again another decision advisers will have to make, as whether this increased cost is absorbed in the business or passed onto clients.
“The only way the advice community will have any hope of amending these never-ending compliance cost increases is leading into the next election with educated clients who are communicating and voicing their concerns with their local federal member.”
As Australia approaches the next federal election, Johnston said politicians will become more incentivised to engage the demands of their constituents in an effort to keep their seat in Parliament, giving Australians a greater opportunity to seek change.
“The political landscape changed 20 years ago this year when PM John Howard cancelled the Pension Fund for Politicians, leaving the vast majority exposed to the ‘dole queue’ if they do not retain their seat,” he said.
“A few months before the election is the time to seriously seek change, their livelihood is on the line.
“With an early election highly unlikely, your clients should be engaged with these realities over the next six months in preparation for the intense political posturing commencing in February 2025.”
When approaching the conversation with clients, Johnston said advisers need to be clear in their intentions, focusing on the need to voice their concerns to politicians rather than attempting to sway their future voting decisions.
“It should be clearly understood that you are not asking your client to change their voting preference at the next election, understandably most get offended with that approach,” he said.
“It is all about educating them on why your fees have been [or about to be] increasing and how they can help to get the message to Canberra, they are unhappy about the situation. It is a form of inferred intimidation.”
They pulled not the whole rug yet from under the advisers’ feet… a few pieces are still left. Someone whose goal to leave this industry in ruins then can not be happy so they decided to make another move. Great effort in providing affordable advice to Australian aging population, I believe that you have justified your existence
Let’s make Advice more affordable says Canberra by:
1) 7.5% GSTax INCREASE to Adviser Fees.
2) More Red Tape and costs for Super Funds to Quadruple check Advice and Fees.
3) ASIC Levies Tripled
4) CSLR for good Advisers to retrospectively pay for Dodgy Dixon MIS fiasco, that ASIC did nothing about.
5) ZERO RED TAPE reduced.
Yep Canberra, awesome efforts.
A new tax on financial advisers, higher taxes on our clients, additional red-tape forced onto financial advisers, our client’s private documentation being forced to be made available for to big institutions. When financial advisers start informing their millions of clients about what is going on, their will be outrage. I was willing to give Stephen Jones the benefit of the doubt, but he is looking extremely foolish right now. If he doesn’t act quickly, this will be a ‘hot mess’ for his Party.
If only the biggest associations wanted to help the industry as much as the AIOFP