Financial planners entering the industry after July 1 face the risk of inadvertently breaching the Tax Agent Services Act, with many dealer groups unaware that they will potentially need to satisfy a separate regulator on tax issues.
With much of the industry predictably focused on being Future of Financial Advice (FoFA) compliant by mid-year, the Financial Planning Association (FPA) this week warned members and the wider industry that the new taxation-agent-services regime applying to financial advisers from July 1 would potentially have significant consequences.
“Fundamentally this piece of legislation will impact financial planners just as much if not more than the FoFA reforms and that has received very little airplay, and awareness out there in the industry is very low,” said the FPA’s, Dante De Gori.
Financial planners providing tax advice within the context of financial advice were initially exempted from Tax Agent Services Act 2009, with industry bodies arguing they should be permanently excluded from an act that was not designed to regulate them.
While the exemption has been extended, most recently by the assistant treasurer, David Bradbury, the FPA has not been able to secure a further extension and advisers could be subject to regulation under the Tax Agents Services Act (TAS Act).
Licensees will need to register each adviser with the Tax Practitioner’s Board (TPB) so they can continue to provide tax advice – even if this is a service that is only rarely required.
Complicating factors
However, aside from potentially falling under the governance of another regulator that doesn’t have ASIC’s experience dealing with the financial planning industry, there are several other complicating factors.
The first is that while financial planners currently operating through an Australian financial services licence will have three years to transition to the new regime, those starting in the industry post-July 1 will need to be registered immediately.
Secondly, the legislation appears to only include regulatory arrangements for financial planners who provide tax advice within the context of providing advice on a financial product with no provision if this is broader, strategic advice.
Craig Meldrum, head of financial advice at Australian Unity Personal Financial Services and part of the FPA team that has made submissions to government on this issue, says more guidance is necessary, although it remains to be seen which regulator provides it.
“We need a much better idea of the look and feel of this legislation and how it will apply,” he told Professional Planner.
Last year the FPA was officially recognised as a Tax Agent Association by the Tax Practitioners Board (TPB), enabling members to apply for registration as a tax agent.
