Synchron director and business consultant Michael Harrison has implored the FSI to investigate the “double taxation” threat he says could put financial advice groups out of business.
Writing in his capacity as a consultant with Strategies Plus, Mr Harrison explained in a submission that there is an injustice in the taxation approach of some state governments to financial advice licensees.
Mr Harrison points out that while most authorised representatives of licensees are self-employed, the flow of payment from commissions and adviser service fees come via the licensee in many cases, which is where the trouble arises.
“In recent years there have been a number of cases where state revenue offices have looked at financial advice licensees with a view to identifying payroll tax liabilities,” Mr Harrison wrote. “Recent examples suggest that the key exemption available for financial advisers is one where, if the financial adviser employs a minimum number of other staff, then the revenue paid to them via the licensee will be exempt from payroll tax assessment.”
This view by tax authorities is resulting in “double taxation” for many licensees as they are paying payroll tax on self-licensed advisers on top of GST, which Mr Harrison described as “fundamentally inconsistent”.
A continuation of this situation is likely to result in the “financial collapse of the licensee”, with “non-aligned and independent licensees” most at risk, due to lack of a parent company that is able to “pick up this significant unplanned and retrospective tax assessment”.
Mr Harrison lamented the removal of the payroll tax exemption in NSW, arguing that claims at the time that the change would have no adverse impact on the financial advice industry have proved to be incorrect.
The FPA, AFA and AIOFP have all previously pledged to make the issue of payroll tax for licensees a lobbying priority, following the Victorian government’s announcement of a payroll tax cut in May.
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