GST blow for wraps
Wrap account fees are set to become more expensive following the introduction of the GST.
Wrap account fees are set to become more expensive following the introduction of the GST.
Under GST law, administration and portfolio management services are not classi-fied as financial supplies and are therefore fully subject to GST
According to AM Corporation's Phil La Greca, the loser will be the end client. "To cover the increased rate of adviser payments, the full GST amount must be charged through to the client. In this circumstance there is no claiming of the input credits by the wrap operator, as these are not their expenses. They are the tax burden of the end user - the client."
Master trusts will not suffer the same fate, he says, as they are classified as financial supplies.
"The fees (from which commissions are sourced) charged by master trusts will be subject to reduced input tax credits at the rate of 75 per cent," says La Greca. "Therefore, clients of master trusts will only pay for 25 per cent of the in-crease of commission themselves and the Government will be subsidising the bal-ance."
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