Advisers may be caught in CGT net
Financialadvisers are facing a potential capital gains tax (CGT) hit in transitioning to the new Financial Services Reform (FSR) regime that has the potential to cost them “massive amounts of money”.
Advisers transitioning to FSR and moving from an individual proper authority to a corporate proper authority structure have voiced concerns that proposed CGT rollover relief provisions are too narrow.
TheFPAhas warned its members to seek both legal and tax advice during the transition process to ensure they are not caught out.
FPA manager policy and government relations Con Hristodoulidissays the relief provisions will only assist those changing structure under FSR, and whose underlying ownership does not actually change.
However,AXAnational compliance manager Simon Wallace says theATOinterprets that the value of a planning business lies in the proper authority. He says in moving from an individual to corporate proper authority, many advisers would move to multiple holders of the proper authority.
Wallace says this “could be a disaster”, with planners potentially incurring CGT on their whole business value in a worst case scenario.
Hristodoulidis says the main concern of Treasury was that businesses may have put off restructuring until the transition period just so they will gain access to CGT relief.
At present, the Tax Law Amendment Bill No. 7 — Schedule 10, set to bring in the CGT relief provisions, is held up in Parliament, but Hristodoulidis believes it may be passed by the end of this year.
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
