Financial advisers have won a temporary reprieve from needing to comply with the Tax Agent Services Act (TASA) regime, but this respite from additional red tape may be short-lived.
Yesterday (June 6) the Tax Laws Amendment (2013 Measures No. 2) Bill 2013 was referred to the Parliamentary Joint Committee (PJC) for Corporations and Financial Services for inquiry and report, the same committee that ruminated on the Future of Financial Advice (FoFA) reforms and the enshrinement of financial planner/financial adviser.
Specifically, schedules 3 and 4 of the Bill 2013, which contain measures to regulate financial planners under the TASA regime, have been referred to the PJC.
Dante De Gori, general manager of policy and conduct at the Financial Planning Association (FPA), welcomed the decision but added that it was unrealistic to expect the PJC to resolve the issue in the time frame given.
Government will consider the PJC recommendations when parliament reconvenes, possibly as early as June 17.
“It is unlikely that this can be done adequately in the next few weeks,” De Gori told Professional Planner.
“We want this issue resolved but not rushed to suit an arbitrary deadline.”
The FPA cited the bill’s many outstanding unresolved issues and missing detail as more than good reason for its referral.
“The FPA was concerned that the need to pass legislation was prioritised over the need to follow due process, consultation and developing legislation that will actually work,” said De Gori. “So, we applaud the decision to give development of the bill more time and more work.”
Scaremongering bodies
One of many industry concerns is that the bill brings financial planners, who are licensed and regulated by ASIC to provide personal financial advice, under the auspices of a second regulator for the same activity: tax advice within the context of financial advice.
De Gori also took a pot shot at accounting bodies, such as the Institute of Public Accountants (IPA), which have argued that bringing financial planners within the existing regulatory regime is vitally important to ensure consistent regulation of all forms of tax advice, irrespective of who provides the services.
“Scaremongering by accounting bodies on this issue has been misleading and unhelpful. The fact is that the FoFA regime starting on July 1 implements some of the greatest reforms to the financial advice profession ever seen, in particular the best interest duty,” he said.
“So, we are disappointed that the government initially succumbed to this unsubstantiated scaremongering on related issues.
“Its referral to the PJC is the right result. We look forward to contributing to the PJC Inquiry to ensure this bill will ultimately deliver what it’s intended to.”
Standards slipping?
In a joint statement, CPA Australia and the Institute of Chartered Accountants Australia (ICAA) said it would continue to push for financial planners to comply with the “more robust academic, competency and ethical requirements”.
Paul Drum, CPA Australia head of policy, said the amendments were important as they put in place appropriate protections – that don’t currently exist – for consumers obtaining tax advice from financial planners.
“Consumers deserve to have access to the highest standards of professional advice from financial planners, which is what this new regulatory framework is aimed at delivering,” he said.
“Parliament’s decision today means that there will continue to be shortcomings in the standards that apply to the provision of tax advice from financial planners.”
Yasser El-Ansary, ICAA general manager of leadership and quality, also expressed concern over the delay in the passage of the legislation.
“The fact of the matter is that there has been three years for everyone to prepare for these reforms, and there is a further three-year transitional period under this proposed new framework – a total of six years.
“We will now work through another round of consultation, and work with parliament and its processes to ensure the regulatory framework is passed in the remaining sitting weeks before the election.”
Time onside… for now
However, the Association of Financial Advisers (AFA) welcomed the delay and called on the government to extend the existing carve-out for financial advisers through to June 30 2014.
“This is a good outcome for financial advisers, as the TASA amendments incorporating financial advisers were flawed and there was both a lack of adequate consultation and seriously insufficient time for implementation,” said AFA chief operating officer Phil Anderson.
“Without adequate review there was a serious risk that this legislation would result in significant unintended consequences.
“The AFA accepts that financial advisers will come under the TASA regime, however it needs to be done in a way that allows for appropriate consultation and sufficient time for implementation.”
The opposition was also quick to score a point or two on what it called the government’s attempt to create “a new licensing regime with less than four weeks to go before implementation, in the face of fierce opposition from the financial services industry and yet again more cost increases for consumers”.
“Unfortunately, this is not the first time the Gillard government has desperately tried to avoid proper process on contentious legislation,” said a statement from the office of Mathias Cormann, shadow assistant treasurer.
“Under pressure from the Coalition, assistant treasurer David Bradbury has been forced to see sense – albeit at the last possible moment. Ensuring good process in relation to major policy changes like this should not be this hard.”
