With the Federal Budget delivered, the Government’s response the Quality of Advice Review is anticipated to be released towards the end of May or early June.
At the Professional Planner Roadshow in March, Minister for Financial Services Stephen Jones said there would be Cabinet deliberations after the Budget was completed. In a post-Budget webinar hosted by the Financial Services Council on Thursday morning, Jones gave an update on the timeframe.
“If we didn’t have a Budget in May we’d have a Cabinet consideration of it… and that work would’ve been out in the field,” Jones said.
Unsurprisingly, the vehicle used to allocate spending for all government programs for the whole country has taken precedence.
“We had the budget and that has taken priority over everything, absolutely everything, not just our response to the [QAR],” Jones said.
“We’ll have a Cabinet recommendation of a bunch of recommendations in a few weeks’ time and I’d hope to be in a position late May, early June to come out and talk to you about the stages of work that we have proposed.”
The Minister has not shown interest in taking on QAR lead Michelle Levy’s recommendations wholesale but has expressed enthusiasm towards “quick wins” for advisers when it comes reducing red tape in the advice process.
However, during the roadshow in March hosted by Conexus Financial, the publisher of Professional Planner, Jones said the QAR and experience pathway will not sufficiently address the advice gap.
Kill the noise
The Minister has taken criticism over the past few weeks for his response to the advice review, with Levy penning an op-ed in the Australian Financial Review which was followed by the publication taking an official editorial position backing her recommendations.
Jones noted the “excitement” over the past fortnight and said his silence on the review has no correlation to his thinking on the matter.
“One of the reasons I went and did a series of roadshows around the country was to make it quite clear that we weren’t going to take a report and bury it,” Jones said, referring to the Conexus roadshow.
“If that was my objective, I wouldn’t have done any of that, but also I wanted to hear first-hand from industry and fine-tune our thinking on it. It’s a thoughtfully important job of work that has been done. It’s not going to be the only input into the government’s consideration, there are others.”
Jones said the accepted proposals will form three pillars: a “non-controversial” pillar of measures that can be implemented quickly; non-controversial measures that might be more difficult or time-consuming to implement; and a pillar of “non-burning deck” issues that will take longer.
All three pillars will be progressed starting at the same time, but the timeframe to deliver a final outcome will be dependent on the required process.
Regarding the proposed marginal tax increase from 15 per cent to 30 per cent for super account balances over $3 million, Jones said there will be no changes to what has been proposed which has received polarising responses in the financial services industry.
The government has aimed to limit how many people will be affected by the tax-concession reduction, Jones said, but the decision to change the threshold will be a decision for future governments and not via indexation.
“Even if we did nothing and left it where it is today, you probably get less than the top 10 per cent of income earners, if you did nothing between now and 2050,” Jones said.
“The default position is we don’t index tax thresholds so that future governments/parliaments can come back and look at them.”
Jones said $3 million was a solid starting point, considering 30 per cent of super balances remain unspent and that there aren’t any other changes planned for the taxation structure during the life of the current Parliament.
“That’s a bit of an indication that while we’ve done a great job on the accumulation side of things, we need to do a better on the income stream, the pension phase, the decumulation side of things,” Jones said.
The other battleground in super is the consultation on the purpose of super, which Jones remains adamant is to provide retirement income.
“It’s consistent with what I’ve been saying for the best part of 12 months now,” Jones said.
“There’s a point at which above no one can argue that it’s about retirement income, it’s about something else.”