‘I’d love some answers’: Howarth hits out at treatment of advisers

The lack of attention for financial advisers was immediately obvious when the profession didn’t get mentioned once in any of the documents.

However, the corporate regulator did receive additional funding, something that could end up impacting advisers in the form of the Australian Securities and Investments Commission (ASIC) industry funding levy.

Speaking in Parliament last week, shadow financial services minister Luke Howarth argued that the government had done little to make life easier for the financial advice profession.

“Financial advisers are doing it tough and paying more under this government at a time when people in our electorates right around Australia need advice. That’s what they need,” Howarth said.

He noted that there were “several measures” across multiple pages of the budget documents that would result in additional ASIC levies.

“My question to the minister is: how much of these additional ASIC levies will be paid for by financial advisers?” Howarth queried during question time.

Among the increases to ASIC’s funding in the budget was $206.4 million over four years from 2024–25 (and $7.2 million per year ongoing) to improve the data capability and cyber security of the Australian Prudential Regulation Authority (APRA) and ASIC, and to continue the stabilisation of business registers and modernisation of legacy systems.

“The cost of this measure will be partially met from cost recovery through ASIC and APRA industry levies,” the budget documents noted.

Speaking with ifa following the budget in May, Financial Advice Association Australia (FAAA) general manager policy, advocacy and standards Phil Anderson noted the funding for registers as important for advisers.

“There was supposed to be a transfer of the registers from ASIC to the ATO that the government then decided not to do and obviously, this particular one signals that the government is looking at enhancing or rebuilding the registers within ASIC,” Anderson said.

“I think anytime they are going to provide additional money to ASIC, unless they say otherwise, we can assume that there’s a risk that it will be caught in the industry funding levy.

“Where it refers to registers, we have the AR register, we have the financial adviser register, we probably pick up a proportion of the cost of the AFSL registers. So, they are going to charge us.”

Howarth also raised concerns over the changes that the ATO has flagged around reduced input tax credits (RITCs).

“On page 180 of Budget Paper No. 1, GST receipts in 2023–24 were upgraded from the MYEFO estimate of $84,079 million to $85,758 million,” he said.

“Does this upgrade include increased receipts due to the ATO’s revised interpretation on eligibility for trustees to claim the reduced input tax credit for GST on fees paid for financial advice?

“I have a couple more questions to the minister on financial advice. We’ve estimated that GST receipts have increased by $250 million because of the ATO’s new interpretation. Does that account with the minister’s estimate?”

The number is in line with the Financial Services Council’s (FSC) forecast, with CEO Blake Briggs labelling the changes an “unbelievable back slip” from the ATO last month.

The industry practice based on ATO rulings has long been that super funds could claim an input tax credit on the cost of the GST that was paid on financial advice services on behalf of their members, which Briggs noted “directly lowered the tax burden on the advice that Australian consumers were receiving”.

However, the RITC removal will see the current 75 per cent discount on GST to clients’ advice fees removed, raising the GST charged from 2.5 per cent to 10 per cent and resulting in a 7.3 per cent increase on total fees charged to the client.

This, Howarth pointed out, does not line up with the goal of improving the affordability of financial advice for more Australians.

“Does this situation, Minister, accord with the government’s stated aim of reducing the cost of financial advice and increasing accessibility for Australians? They’re the minister’s own words,” he said.

“I’d love some answers in relation to that.”

This is not the first time that the shadow minister has taken aim at Financial Services Minister Stephen Jones, with Howarth in April saying it was time the minister “steps up or steps aside”.

“At a time when it has never been more important for Australians to have access to quality financial advice, the proposed Treasury Laws Amendment (Delivery Better Financial Outcomes and Other Measures) Bill 2024, as it currently sits, will make financial advice more inaccessible and expensive,” he said.

“The only thing the Assistant Treasurer has successfully delivered in his scrambled legislation is confusion and chaos.

“Industry players have been crying out for reform, only to have their concerns met with deaf ears. They are rightly angry.

“The government must act to immediately fix its mess. It’s time Stephen Jones steps up or steps aside.”