Adviser launches petition to fight RITC increase

In December last year, the Australian Taxation Office (ATO) announced that on 1 July 2024, super funds and IDPS operators will no longer be able to claim a Reduced Input Tax Credit (RITC) on behalf of members for advice fees collected by the platform.

This change has effectively increased the GST on advice fees from 2.5 per cent to the full 10 per cent, resulting in higher costs to Australians saving or funding their retirement.

Under the previous understanding, an $1,100 advice fee (including GST) resulted in a net payment of $1,025 after a $75 credit. However, this would now see clients charges the full $1,100.

Leanne Bull, director and senior financial planner at Bull Financial Group, has kicked off a petition to reverse the change, arguing that it is little more than a “sneaky tax hike” at a time when financial advice is needed more than ever.

“It's just not in the spirit of bringing down costs,” Bull told ifa.

“We've all been talking about ways to bring costs down, and then they turn around and just put up hundreds of dollars just like that. It's just completely against anything that's been aimed at achieving in the last number of years.”

The change has also not come on the back of any legislative action, the ATO has simply changed its interpretation of legislation that she noted has been “supported by many private rulings that had been in place over 24 years since the introduction of GST in 2000”.

Bull added that she had worked with an FAAA sub-committee established to explore the full extent of government costs on financial advisers, and the accumulated impact of costs for the delivery of advice and advice fees.

The study found that the average cost based on case studies of 150 clients per adviser on average translated to an uplift in costs to service of $870-$995 per client per year. GST accounted for around $150 to this cost, however since the interpretation change this now adds an additional $600.

In May, the Financial Services Council (FSC) forecasted that the change would cost Australians $250 million, with chief executive Blake Briggs saying there has to be a legislative fix to “address this slightly perverse outcome”.

“There is a solution there, and I think it’s one that upholds longstanding industry practice that’s in the best interest of advice consumers, but we need the government to act,” Briggs said at the time.

Bull added that 24 years of interpretation are essentially being thrown out and additional dollars raised in tax by “somebody’s thought pattern”.

“The industry got it delayed three months. The industry did put up a fight, like we do on all sorts of things. I’m on the [FAAA] policy and regulations committee, and the reality is we're just fighting so much stuff at the moment,” Bull said.

“You would nearly need to triple membership fees to have a staff triple the size to be able to fight all the things that they keep coming up with, because you've got to have eyes in your back of your head.

“Plus, even if you do spend a lot of time on something like we have with the Quality of Advice Review, here we are 700 days later, and the quick wins, we haven't even got any movement on them, let alone any movement on the stuff that really will make a big difference.”

Bull has met with shadow financial services minister Luke Howarth as well as Bert van Manen, who last week launched a private member’s bill to streamline advice, and Keith Pitt, and said the Liberal MPs “recognised that this change is making professional financial advice increasingly unaffordable”.

Additionally, she said Pitt has agreed to table the petition in the House of Representatives to ask the government to amend the law to reinstate the rebate.

“It's just unfair. People that are trying to look after themselves, trying to do all the right things, are just getting kicked and kicked and kicked in all sorts of ways. We've had all sorts of costs to passed on to us that we've got to pass on to them. You can only absorb so much,” Bull added.

The petition, which was launched on Friday, has so far received 440 signatures, though Bull is hoping that can reach into the thousands.

“The volume of numbers will definitely make a difference. We want a larger number of signatures to make the point that enough is enough, and we need to make advice more affordable, not continue to add additional costs,” she said.

The petition will be open until 4 December 2024 on the Parliament e-petition site.