The implementation of a wider GST on financial services poses a serious threat to financial planners, according to industry figures.
The implementation of a wider GST on financial services poses a serious threat to financial planners, according to industry figures.
A consultation paper released by the Government says the full GST will apply to a large number of services provided by financial institutions. Commission-based groups will pay GST on all revenue and receive no tax credits. However, those not charging will be taxed and will receive tax credits.
Financial Planning Association (FPA) chief executive Michael McKenna says finan-cial planners will have difficulty in implementing many of the measures.
The chief area of concern is who will pay the costs. Gadens Lawyers financial services partner Phil Heraghty says there will be consumer resistance to any price hikes in financial planners’ services.
“At the coalface, planners will probably absorb most of the GST into the prac-tice with the result: a drop in profitability,” Heraghty says.
Investment and Financial Services Association (IFSA) chief executive Lynn Ralph believes the wider GST coverage will also threaten fund managers. Most inputs into retail products are financial supplies, which will be fully taxed under the new system.
Ralph says that depending on the size and nature of the tax credits, there will be upward pressure on prices of managed funds.
She says the tax has the potential to give overseas companies a lift over Aus-tralian rivals.
“This proposal has the potential to place Australian fund managers at a competi-tive disadvantage with other financial centres. This would be an unfortunate outcome that could work against Australia’s bid to become a global financial centre.”
The FPA and IFSA have both questioned the new rules after the Government stated last August that most financial services would be input taxed and not fall under a direct GST.
As a result, both groups are examining the statement and will make submissions to the Government.
