TASA train wreck awaits hero

The impending application of the Tax Agent Services Act 2009 (TASA) to financial planners has been described as potentially more onerous than the Future of Financial Advice (FoFA) reforms as it will have an impact on the entire financial advice industry.

It’s like one of those slow motion action sequences in a Hollywood blockbuster in which the hero has made it through all the flying bullets and screaming hoards of henchmen, and right when his objective is in sight you clutch the arms of your Gold Class recliner more tightly because you see that he has inadvertently played right into the evil mastermind’s hands, and you wonder how he is going to make it out of this in one piece and win the day.

Not being overly dramatic, with so much of the industry’s focus being consumed by FoFA and Stronger Super reforms, I don’t believe enough is being done to recognise the implications on our profession as the advice train hurtles inexorably towards TASA.

On June 30 this year, the deferral of TASA 2009 will expire and the act will apply to financial planners. With Parliament not sitting again until budget time in May, this exposure draft is likely only to be passed in late June. And there are still regulations and guidance documents required by both the Tax Practitioners Board (TPB) and the Australian Securities and Investments Commission (ASIC), which then need to be consulted on and released.

What to expect?

As TASA will impact the entire advice profession, bodies such as the Financial Planning Association (FPA) have lobbied to further extend the deferral arrangements to allow time for further consultation, especially in light of the measures being drafted around financial product advice, which ignores product-non-specific “strategic advice”. Does this mean then that financial planners can no longer provide advice with a tax outcome unless it’s product-specific advice? The wording in the exposure draft around registered tax (financial product) advisers seems to suggest it.

And what about education and experience? Most financial advisers who studied the eight units of a diploma of financial planning or an advanced diploma of financial services (financial planning) in order to achieve RG146 also did a 13-week unit devoted to taxation. They didn’t do this to become (or want to become) quasi-tax specialists or accountants, but so they understand the ramifications of incidental tax advice on the wealth creation and retirement strategies they implement to assist clients achieve financial goals and objectives.

However, there is as yet no detail on how current qualifications and experience will be assessed.

As a registered tax agent and chartered tax adviser servicing financial advisers (and accountants) as a technical services manager, I understand what level of tax knowledge advisers need to know. However, I’m not sure that ASIC and the TPB have considered this enough.

There are further TASA implications that will be critical for financial services licensees to comprehend. They include compliance with the Corporations Act, transition to FoFA, client best interest and its impact on professional indemnity insurance, competency and dual regulation for financial planners under both ASIC and the TPB, with financial planners subject to the TPB Code of Conduct from July 1, 2013.

Let’s hope the hero prevails.

Craig Meldrum is head of financial advice at Australian Unity Personal Financial Services Limited and sits on the board policy and regulation committee of the Financial Planning Association.