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 2GB on Tuesday night, Financial Services Council (FSC) chief executive Blake Briggs said it is an “unbelievable back slip” from the ATO.
“We have a government at the moment, with Stephen Jones as the relevant minister, championing affordable and accessible advice and reforms to try to bring down the cost of advice,” Briggs said.
“But at the same time, the ATO has made a very unexpected change in the treatment of GST on financial advice, which will immediately increase the tax burden when it takes effect in just a couple of weeks’ time.
“Our forecast is that this will cost Australians $250 million more in tax on financial advice, which just makes it unaffordable, it’s quite extraordinary.”
The industry practice based on ATO rulings has long been that super funds could claim an input tax credit on the cost of the GST that was paid on financial advice services on behalf of their members, which Briggs noted “directly lowered the tax burden on the advice that Australian consumers were receiving”.
However, 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.
“Quite extraordinarily just before Christmas, literally late December, the ATO brought out an unexpected change of position that within only a matter of weeks, this would change,” Briggs said.
“Now, we’ve successfully pushed back for a slightly later start date to July this year. But that was only in order to allow the government time to look at legislative change. Unfortunately, there hasn’t been any real consideration of this by the Assistant Treasurer. So we’re calling for him to urgently consult on how to fix this, so the Australians don’t end up paying more tax.”
He added that while the FSC is pushing for a further delay from the ATO, the main goal has to be a legislative fix to “address this slightly perverse outcome”.
“There is a solution there, and I think it’s one that upholds longstanding industry practice that’s in the best interest of advice consumers, but we need the government to act,” Briggs said.
The changes also fly in the face of the government’s “stated policy objective”, he said, with the RITC changes combining with other measures to make advice less affordable.
“On top of a range of other things that have happened this year in the sector such as ASIC levies, the commencement of the Compensation Scheme of Last Resort, with delays in getting some of those reforms we’ve talked about through Parliament, all of these together, it’s just contradicting government policy and headed the wrong way,” Briggs said.
“For those Australian consumers getting advice, and then paying for that out of their superannuation savings, what that will mean is the advice costs more because of this increased tax component, and that comes out of people’s superannuation and retirement savings. So people are increasingly that little bit poorer. And it directly contradicts the whole purpose of having superannuation in place in the first place.”
I trust that those commenting on this forum should have enough understanding of the Westminster system to realise that what has happened is nothing to do with the government, current or former. Instead, the change has arisen as a result of the ATO’s change in interpretation during its administration of the law. Remember, parliament enacts the law; the executive (here, the ATO) administers it; and the judiciary interprets it, when it gets that far. Anyone blaming government for the development discussed here shouldn’t be advising, if they have so little understanding of the system in which we all operate.
Clearly ASIC, Treasury and the sitting Government are out to eliminate Advisers. Yes, we get it that an AMP sales champ moved someone’s Defined Pension Pension into AMP Lifetime Super and charged them 5% entry fees…but can’t we move beyond that now? The question is why this deep hatred of Advisers turned into a significant detriment to Consumers.
Didn’t the AIOFP advocate to vote Labor…?
You could not make this stuff up.
You trying to say Liberals are better?
I’m voting the Greens at the next election. At least that way the destruction of my business and my mental health will be quick rather than dragging on like it has with the Libs and ALP. Realistically advisers have no political friends and ASIC are that incompetent it must be deliberate.
ASIC specifically asked for this
What is even more perverse is that as all GST revenue is paid to the states, the Federal Govt will be promoting how wonderful they are in finding this additional $250 million funding for the states by stealth.
Based on Jones previous statements there will be no mention of where the additional GST came from to pay to the states. Beyond devious.
Let’s also add in the increase of AFS Licensee costs. We have just been told that our licensee will be increasing our fees by around 7.4% from 1 July, which equates to an $8,250pa increase for our practice. Surprising seeing the AFSL is listed on the ASX citing strong profit increases from increasing revenue……
WT?
Impossible to know whether that’s reasonable or not and completely dependent on your revenue, number of advisers, how long since your last increase, the value they add (or whether they just make your life hell). Time for us all to focus less on input costs (not that they are not important) and focus more on top line revenue growth. The supply-demand equation certainly suggests there is upside available to most if not all practices
Let’s make Advice more Affordable says Canberra, Jonesy, ASIC, etc.
So what do they do:
– Increase GST Taxes on Advice by adding the extra 7.5%
– New Ongoing Life Commissions Opt In sign off for all advised clients. (when they already authorised and signed off on such Commissions in the SoA)
– Triple the ASIC Levy nearly $3K per adviser
– CSLR costs likely to be$10K per Adviser when the Govt has paid NOTHING for DIXON’s when they promisedto pay the first 12 mths.
LIES, LIES, LIES AND MORE LIES FROM JONSEY AND CANBERRA.
So the FSC find that perverse, but a handful of planners paying the for product failures while FSC members (product manufacturers) pay not one cent towards this! I agree that the reduction RTIC is ridiculous, but the product manufacturers being left out of the CSLR, that is perverse.
Another underhanded way this Government is trying to get its grubby hands on more tax revenue.
This exemplifies the two-faced politics at play under Stephen Jones.
The narrative of making advice more affordable is just not true. This is clearly not their prerogative.
Actions speak louder than words…
Good luck getting re-elected!
Will the AIOFP say vote Liberal this time?
I had a customers yesterday say what can I do about this I said vote out labor government and we will talk to the libs to this put back in place.