The Association of Financial Advisers (AFA) considers the budget announcements to be broadly supportive of creating a confidence and momentum shift in the Australian economy.
AFA CEO Brad Fox said that the outcome the budget needed to achieve was a shift in the mindset of Australians from pessimism to optimism, but cautioned against forgetting realism.
“The budget represents a realistic attempt to unfreeze the wheels of small business across the economy. If as a nation we are to get out of this period of financial inertia, then a new wave of confidence to invest, to innovate and to employ needs to be created. In our experience that always starts with the brave and resilient small business sector as the major employer in our economy,” Mr Fox said.
“The small business asset deduction initiative is a clear message to small business to invest in assets that increase productivity and profitability. The catch could be that many of the assets are sourced from overseas manufacturers and therefore could represent a significant outflow from the Australian economy.”
Mr Fox said the AFA does not think the tax reductions are sufficient to drive behaviour and would like to have seen measures that incentivised employing more people in small business. “That would have gone hand-in-hand with the measures designed to increase workplace participation,” he said.
In considering the impact on financial advice businesses the AFA believes that the asset deduction initiative will help financial advice practices to bring forward a spend on assets to support dealing with current disruptive changes, Mr Fox said.
“The changes brought on by FoFA, consumer expectations and potential insurance industry reform need to be dealt with by practice owners to future-proof their businesses. Acquiring assets that support practice administration, the professional provision of advice, client communication and service initiatives will be more attractive under the measure,” Mr Fox said. “This represents an incentive for financial advisers to bring forward changes in the way they do business including office refits and technology upgrades.”
Mr Fox said the AFA believes measures impacting retirees balance the budget imperatives with fairness. “The pressure to deal with the deficit is clear and supporting increased access to the age pension for Australians who are less well-off at the expense of reducing age pension support for Australians with larger superannuation balances is appropriate. It supports the notion that the age pension is a safety net, and most likely retains sufficient incentive for people to seek financial independence in retirement through maximising their personal asset position. Retaining CPI indexation of the age pension is also fair and reasonable, as is limiting the income excluded from the income test from defined benefit pensions to 10%,” he said. “It is very pleasing to see stability of the rules around superannuation prioritised to increase confidence in the system.”
In reflecting on the consumer need for financial advice, Mr Fox said although we have a robust and secure financial system in Australia, the complexity is overwhelming for most Australians. “Once again this budget is a clear indication that those Australians with a financial adviser have a significant advantage when it comes to coping with budget changes such as family tax benefit, child care rebates, tax concessions and age pension rule alterations. Within days advised clients will be talking with their adviser to seek the confidence and certainty of knowing what this budget will mean for them,” he said.
Mr Fox said the call from the government for more people to enter self-employment and to have-a-go should come with a warning, know what you are getting into. “Financial advisers need to be prepared to have honest and meaningful conversations with people contemplating making the life defining change of starting their own business before they make that move. Financial advisers, most of whom are self-employed, understand the financial and emotional needs of their clients and are best placed to discuss the real challenges everyday Australians will face when entering self-employment or small business ownership.”
