Measures in the Abbott Government’s inaugural budget have divided financial planning groups, prompting both praise for kept super promises and condemnation for likely impacts on the accessibility of advice.
The Association of Financial Advisers (AFA) said welfare recipients and middle income families would be most affected by the budget’s cuts and levies.
“These families will have less disposable income and this may affect their ability to afford vital personal insurance,” AFA CEO Brad Fox said.
“They may also have less capacity to fund financial investments, reduce personal borrowings or make additional contributions to super.”
However, the Financial Planning Association (FPA) said changes to social security would make advice more important than ever, as affected parties struggle to comprehend what the changes mean for them.
“The Budget included a number of changes to social security and it will be up to financial planners to review these changes in detail to identify how their clients will be impacted,” the FPA’s general manager of policy and conduct, Dante De Gori, said.
Both the FPA and the AFA said they were pleased the Government had kept its commitment to avoid adverse changes to Australia’s superannuation system.
The FPA welcomed proposals to raise the pension age to 70, increase the super guarantee to 12 per cent and changes to the non-concessional gap.
“The Budget states that for any excess contributions made after 1 July 2013 which breach the non-concessional cap, the Government will allow people to withdraw those excess contributions and associated earnings,” De Gori said.
“Whether they choose this option or decide to leave their excess contributions in the fund will have different implications, and financial planners will be pivotal in explaining this to clients.”
Fox added: “Bringing legislative stability to superannuation is essential to building trust and confidence in superannuation as the preferred savings vehicle to fund retirement.”
The Budget also contained cuts of up to $120 million over five years to the funding of the financial services regulator, the Australian Securities and Investments Commission’s (ASIC) .
The AFA said this could move the profession’s self-regulatory case forward at a quicker pace.
“As financial advice continues its progression towards becoming a universally recognised profession, the opportunity for greater self-regulation will increase. Reduced funding for ASIC, as the regulator of financial advice, may provide further impetus to bring this forward,” he said.
The FPA said it would keep a close eye on the changes and assess how they impact planners.
“In particular we will be keeping a watch on the impact to the funding in respect to any adverse effect in terms of licensing costs and the like for financial planners,” De Gori said.
“We will also seek to ensure no impact on the regulator’s services and capacity to monitor and supervise the industry.”
