Changes to GST rebates push up the cost of advice

SMSF Association Media Release

The SMSF Association is calling on the Government to amend the legislation governing the GST treatment of adviser fees to avoid increased costs being passed on to consumers.

Commenting on the ATO announcement late last year, that super funds and platform providers would, from 1 July 2024, no longer be permitted to claim a rebate for the GST component of adviser fees deducted from a member’s superannuation account, SMSF Association Head of Policy and Advocacy, Tracey Scotchbrook, said the timing of the announcement was unfortunate.

Scotchbrook says: “Given all the focus at the moment on reducing the cost of advice, this announcement, which will have the effect of pushing up the cost of advice, is contrary to the Government’s stated objective of enhancing the affordability and accessibility of financial advice.”

It is estimated this change in the treatment of GST on adviser fees will increase the cost of advice to impacted consumers by around 7% and it is likely to impact many thousands of super fund members and their long-term retirement savings. The cost to the industry in terms of changes to systems and the supporting fee disclosure documentations should also not be overlooked.

Scotchbrook added: “To preserve the status quo and to support the advice industry which in recent times has been crippled by the rising cost of sector-based levies, we are asking the Government to amend the law to ensure the previous interpretation for the treatment of adviser fees is retained.”

“This could be achieved by a relatively simple legislative amendment to preserve the approach adopted by industry and supported by multiple private binding rulings.”

In the interim the Association is also calling on ASIC to join the ATO on their no compliance approach. Noting the transitional period should be extended beyond 30 June to provide certainty and clarity, as both product issuers and financial advisers scramble to comply with this unexpected change and to identify, notify and engage with impacted clients.