It’s like a ticking time bomb sitting beneath the financial planning industry.
Tax legislation aimed at snaring IT and construction contractors has unintentionally caught Australia’s 15,000 financial planners in its net.
The Australian Tax Office (ATO) has so far rejected pleas by the Financial Planning Association (FPA) to have planners exempted from the changes. An Access Economics report says the alienation of personal income legislation could cost financial planner $120 million this year climbing to $156 million in following years.
FPA public policy manager Con Hristodoulidis says the association has written to the financial services minister Joe Hockey and assistant treasurer Rod Kemp following the rejections by the ATO.
“The Government is aware planners operate through a business structure and have provided a section within the Financial Services Reform Bill which recognises the industry reality,” Hristodoulidis says.
The FPA has urged the Government to consider this section and make the start date of the Financial Services Reform Bill (FSRB), currently set for 1 January next year, retrospective to 1 July this year.
Such a move would allow planners to operate as they do now and allow them to deal with the ATO to determine if they are exempt from personal services income taxation.
The FPA expects to meet with both Hockey and Kemp in the next week.
The issue stems from current regulations which require planners to work within a corporate structure, such as a dealer group. This results in the ATO considering planners to be earning personal services income under the alienation laws, because 80 per cent of their income is derived from one source.
The outcome is being closely watched and supported by the Association of Financial Advisers (AFA) and the National Insurance Brokers Association (NIBA).
Both groups are currently exempt from the alienation laws but will be covered by them when the FSRB is finally enacted.
