The federal budget strongly indicated that Australians would need to tighten their purses for the foreseeable future.
Despite a “small” surplus of $4.2 billion, Treasurer Jim Chalmers confirmed on Tuesday that the return to black would only be temporary and that smaller deficits would ensure, alongside muted GDP growth of 1.5 per cent in 2023–24, a modest lift in unemployment and continued high inflation.
Although the budget featured a headline-worthy $14.6 billion cost of living relief package spanning four years, it was predominantly a frugal document that reflected the current economic challenges and painted a picture of ongoing hardships for households and businesses across the country.
Nevertheless, one could argue that the present moment would have been an opportune time to introduce regulatory relief for the advice industry and grant financial advice the much-needed status of tax deductibility.
Namely, as previously discussed, the 2022–23 financial year is expected to see a big increase in Australian Securities and Investments Commission (ASIC) fees paid by financial advisers following the expiration of a two-year freeze implemented by the previous government.
But rather than heeding the advice of industry groups and extending the freeze when it assumed government, or even in Tuesday’s budget, Labor appears to still be reviewing the ASIC funding model — a review they have provided minimal information about.
Speaking to ifa last month, Phil Anderson, AFA chief executive officer, said: “We are now in a year where financial advisers are exposed to the prospect of a significant increase in the levy”.
There are a number of factors in play with this, he said, including the significant reduction in adviser numbers, an expected decline in the spend on enforcement activity, and an increase in other ASIC costs.
Little did Mr Anderson know at the time that the “other ASIC costs” would actually increase in the budget, potentially indicating even higher levies. Namely, Tuesday’s budget did mention ASIC levies, once, to indicate that they would now fund ASIC’s greenwashing initiatives.
To be precise, according to the budget papers, ASIC would receive $4.3 million in 2023–24 to ensure the integrity of sustainable finance markets by investigating and undertaking enforcement action against market participants engaging in greenwashing. This funding, the papers confirmed, would be cost recovered through levies under ASIC’s industry funding model.
So, as anticipated, it would appear that the cost of providing advice is on track to significantly increase for advisers, potentially exacerbating the gap between Australians and access to advice.
This gap could have been slightly offset by an announcement regarding the tax deductibility of advice.
But in Tuesday’s budget, the Albanese government disregarded the longstanding recommendation to allow tax deductibility for financial advice fees.
Last year, it came to light that the tax office would finally update its guidance on the tax deductibility of financial advice by the middle of this year.
Since their inception in 1995, the existing regulations dictated that expenses incurred for continuous strategic financial advice, or the creation of an investment portfolio cannot be claimed as tax deductions.
Back in December, the CEO of the Financial Planning Association — now the Financial Advice Association Australia — welcomed the ATO’s announced review, calling it a possible game changer.
“One of the quickest and easiest ways to make quality financial advice more affordable for consumers, would be to make it tax-deductible in full,” Sarah Abood said at the time.
Considering the potential impact on the federal budget, there is some doubt as to whether an announcement regarding this relief will be made promptly, especially in the current challenging economic circumstance.
However, what won’t harm the budget is the Quality of Advice Review (QAR) — the one that the government has been sitting on for months.
In March, Financial Services Minister, Stephen Jones hinted that the government’s stance on Michelle Levy’s recommendations would not be disclosed until after the May budget.
Given that the budget has officially been unveiled, perhaps the QAR response could follow shortly?
The advice industry, and associations, has allowed itself to get distracted.
Efforts should never have been to water down education standards, but instead to stop the great big taxes being imposed on the industry – the ASIC levy and CSOLR are an unfair imposition on small business.
I feel like we are being drip fed with these articles. Advice costs too much…. lower income people are not getting advice… Industry super funds will eventually be getting grants from the govt to give low level advice…. I feel we are one labour govt budget away from that.
Anyone notice a pattern – Liberals and Labor – Treasury advising both?
The budget was a non-event. Minister Jones has no more excuses. Implelement QAR now.
It is a disgrace that advisers need to pay for the big government bureaucracy that is ASIC.
I will never forgive the Freedenberg & Hume for introducing this.
It’s really absurd 1 year in and after acknowledging the problem all this Government has done is make it more expensive to provide advice and increase the Tax (via the ASIC Levy) for remaining suffering Advisers. Feel so dumb to have voted for them under their commitment to help. Why not implement the deductibility? Just NALI exemptions for super, failed legislation for less super reporting and burying actual advisers in more cost.
Should be ashamed and it’s genuinely the last straw for me.
Another reason why voting should be made non compulsory like it is in the US…
The growing “tax-deductible” financial advice is intrafund “advice”(which is charged ongoing, without member consent), and this deduction is only enjoyed by the super fund, not by retail advisers. Time to get rid of Intrafund advice if you are serious about level playing fields.