Taylor and Howarth call for removal of s99FA from DBFO bill

Shadow treasurer Angus Taylor and shadow minister for financial services Luke Howarth have addressed a letter to Financial Services Minister Stephen Jones, seen by ifa, to demand section 99FA be removed from the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024.

We bring you the letter in its entirety:

We are writing to you regarding the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024.

This Bill implements a number of important measures that the Coalition has been calling for some time, including the first tranche of the Quality of Advice Review and vital reforms to the location and producer offsets for the screen sector.

Businesses in the financial advice, financial services and the screen sectors are eagerly awaiting the passage of this legislation.

However, the Coalition has grave concerns with the Schedule 1 of the Bill. As drafted we believe it is likely to increase the costs of financial advice and put an undue regulatory burden on financial advisers.

As the recent Senate Economics Legislation Committee inquiry highlighted, while the government’s amendments have addressed the concerns regarding drafting errors around life insurance commissions, they have not resolved the challenges presented by Section 99FA, namely:

• That the clause adds a high level legal risk to superannuation trustees that runs counter to the policy intent of increasing access to advice;
• That the clause will alter superannuation funds’ risk appetite and willingness to allow members to deduct advice fees from their superannuation, either by reducing access to advice or increasing compliance obligations to financial advisers;
• That this may create privacy risks for individuals’ personal financial information; and
• That this provision may increase costs of receiving financial advice, and of administration of super funds.

As witnesses from ASFA, the Financial Advice Association of Australia, the Law Council of Australia and the Financial Services Council indicated to the committee there is a significant discrepancy between what the government says the intent of this clause is, and what industry say its impacts will be.

In the words of the FAAA, this clause “threatens the financial wellbeing of Australians” and “add[s] nothing but confusion, uncertainty and cost.” In the words of the Financial Services Council, this clause fails “to achieve the common policy objective of more affordable and accessible advice” and will “put an unacceptable legal burden on trustees” and “an unacceptable regulatory cost on advice businesses.”

The Coalition therefore recommends that the Government remove section 99FA in division 1 of Schedule 1 from the Bill. We will support the Bill should this change be made and work with the Government to facilitate its speedy passage through the Senate and the House.

The letter also addresses other areas of the bill, which aren’t related to financial advice.