FSCP reprimands adviser over NCC error

The Financial Service and Credit Panel has reprimanded a financial adviser over advice they provided in June 2022 recommending a client make a superannuation non-concessional contribution of $145,000 for the 2022-23 financial year.

Anonymised as “Ms A”, the FSCP said the adviser failed to take into account that the client had previously received advice in February 2021, by another adviser authorised by the same AFS licensee as the relevant provider, which recommended the client make a lump sum NCC of $299,000 in the 2020-21 financial year.

That triggered a “bring-forward arrangement” which reduced the client’s NCC cap to $1,000 for the next two financial years.

As a result of following the advice, the client was notified by the ATO in September 2023 that she needed to withdraw $157,117.14 from her superannuation and that her 2022-23 income tax assessment would be amended to include her associated earnings amount of $17,134.

The Sitting Panel believed that the relevant provider contravened sections 961B(1), 961G and 921E(3) specifically they did not demonstrate compliance with the Code of Ethics’ value of diligence and breached Standard 5.

It is the latest in a string of action taken against financial advisers over super contribution errors.

In December last year, the FSCP reprimanded another relevant provider for providing incorrect advice on a client’s non-concessional contributions cap.

“The relevant provider gave advice in January 2023 recommending a client make a superannuation non-concessional contribution of $329,000 in the 2022–23 financial year when the client’s non-concessional cap for that year was $220,000,” the FSCP said.

“When giving the advice, the relevant provider failed to obtain or take into account the client’s superannuation assets in the client’s PSS pension fund. As a result, the client needed to withdraw $120,735 from their superannuation and pay tax on the associated earning of $13,570.”

This was followed by more reprimands in both April and May, also related to NCC errors.

One, Mr U, gave advice in April 2023 recommending a client make a superannuation non-concessional contribution of $299,000 for the 2022–23 financial year.

When giving the advice, the relevant provider failed to identify and take into account that the client had previously made a lump-sum non-concessional contribution of $300,000 in the 2020–21 financial year, which reduced the client’s non-concessional contribution cap to nil for the next two financial years.

As a result of accepting the advice, the client had to withdraw $330,221.68 from their superannuation and incurred additional tax liabilities of $5,552.58 on associated earnings.