Advisers must tread carefully in relation to changes announced in the 2016-17 federal budget on 3 May because there will be no legislative certainty before the federal election, warns the AFA.
According to an AFA statement, the budget heralded changes that, if legislated, will impact some of the financial advice strategies currently in place with some clients.
AFA chief executive Brad Fox said the most significant short-term impact will be on advice that requires decisions to be made or actions to be taken between now and 30 June.
"We can foresee a number of advice situations where an adviser may have to explain to a client that the advice they give may change, depending on the outcome of the election," Mr Fox said.
"This may mean saying something like, 'If the measures announced in the budget are adopted, then my advice to you is X, but if they do not become legislation, then my advice to you is Y'."
Mr Fox said uncertainty exists in areas that have a retrospective element to them, such as non-concessional contribution (NCC) limits.
He further noted that advice strategies already in place with existing clients that require NCCs to be made from budget night will also need to be reconsidered if an individual's contributions, including those backdated to 2007, will exceed the $500,000 NCC cap.
"Advisers need absolute clarity on the client's NCC since 2007 before allowing any further NCCs to be made," he said.
"The suggested penalty consequences of getting this wrong are too large to ignore."
The AFA also said that existing client advice strategies that do not maximise a client's concessional contribution caps this and next financial year will also need to be rethought.
"The reduction in Concessional Contribution caps back to just $25,000 from 1 July 2017 will certainly have an impact on baby boomers, particularly those juggling debt repayment alongside accumulating sufficient funds into super for retirement," Mr Fox said.
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