CAANZ

Pressing issues requiring action

TONY NEGLINE is superannuation leader at Chartered Accountants Australia and New Zealand. At the time of writing, the federal election was just under two weeks away and while the outcome was unknown, the online bookies were all expecting an ALP win.

Regardless of which major party forms government, I think the list of items that need to be addressed by them is very similar. To date both major parties have not said much about their plans for superannuation and financial services. Here are three important items the next government will need to seriously look at. 1. Non-arm’s-length income/expenditure (NALI/

NALE) provisions – the whole superannuation sector needs a solution to the mess created by widely drafted law and an expansive administrative interpretation taken by the ATO.

There is a need for an anti-avoidance provision in the tax laws in relation to super fund investments.

The tax breaks given to the super sector are an irresistible attraction to many individuals. The problem is those who want to unreasonably access these concessions by ‘foul’ means.

Many professional and industry associations have been advocating for months to have the current NALI rules narrowed. In late March,

Superannuation, Financial Services and the

Digital Economy Minister Jane Hume issued a press release stating the coalition would seek to amend the law.

We understand the ALP agrees the current provisions need to be amended, however, at the time of writing, it had not made an official announcement.

In our view, this area of the law requires urgent amendment that is backdated to 1 July 2018. 2. Financial advice regime – the regulation and supervision of the financial advice sector was made worse by the Future of Financial Advice changes and this bad situation was made even worse by the creation of the Financial

Adviser Standards and Ethics Authority and the enactment of some of the financial services royal commission recommendations.

At present, the cost of providing advice to a new client far outstrips what many clients are prepared to pay. It is quite common for many advice practices to absorb some of these initial costs in order to reduce client outlays.

Some clients seek advice from various places, including ‘finfluencers’.

It also not unknown for some product providers and financial advisers to seek to deal with investors who have been declared by an accountant to satisfy the definition of a wholesale or sophisticated investor because it reduces the provider’s or adviser’s disclosure obligations under the Corporations Act. For example, no statement of advice is required for a wholesale or sophisticated investor. Further, clients who fit into the wholesale or sophisticated categories cannot access the Australian Financial Complaints

Authority when disputes arise.

Over the remainder of this year the governmentinitiated Quality of Advice Review will continue.

In addition, over the next few years the Australian

Law Reform Commission will be looking at ways to simplify the Corporations Act and related regulations and delegated legislation.

Chartered Accountants Australia and New

Zealand welcomes both reviews and will actively participate in them. We hope they lead to better outcomes for all participants in the advice sector, especially clients including those who currently cannot access advice.

However, we are concerned that both reviews are too narrow. While the provision of financial advice is regulated by the Corporations Act, there are many other areas of the law that impact what a financial adviser might be able to recommend to a client. The following might be important too – trust law, income tax laws, superannuation laws, Centrelink or Department of Veterans’ Affairs entitlements, state/territory property law and stamp duty provisions.

All of these areas are complex in their own right and when two or more of these areas are combined together within a Corporations Act financial advice setting, the whole process of providing that advice can be intricately complex, requiring great care, time and effort to ensure nothing is missed.

While the simplification of laws should be welcomed and encouraged in nearly all cases, we would be concerned if anyone thinks the financial advice cost structures will dramatically fall if the regulation of financial advice in the

Corporations Act on its own is improved. 3. Binding death benefit nominations (BDBN) – before the end of the year the High Court will hand down its judgment about BDBNs in the Hill v Zuda case. Regardless of this decision, we think

BDBNs as allowed for in the Superannuation

Industry (Supervision) Act need significant reform for all super funds.