FAAA reminds ATO on general advice payment rules in super

The Australian Taxation Office (ATO) has been reminded that it is not possible for superannuation funds to directly charge members for the provision of general advice.

The reminder has come from the Financial Advice Association of Australia (FAAA) as part of the organisation’s response to the ATO’s draft compliance guidance around Fees for Financial Advice Paid from Member Accounts by Superannuation Funds.

While the FAA welcomed the ATO draft guidance, it pointed out a number of shortcomings including with respect to general advice provision.

The FAAA said it recognises the importance for members of superannuation funds to be able to access financial advice and claim a tax deduction for financial advice fees paid from their account.

“In the context of the passing of the Delivering Better Financial Outcomes Tranche 1 Bill in July 2024, the provision of this guideline is both necessary and important,” it said.

“We believe that the position taken in the draft PCG presents a practical approach and should be relatively straightforward to implement.

“Whilst we support the practical approach taken in paragraph 25, it is important to make the point that some members of superannuation funds who have met a condition of release and have commenced a retirement phase product, may continue to work and as a result also maintain an accumulation phase product,” it said.

“Whilst fees charged to their retirement phase product would not be deductible, fees charged to their accumulation phase product should be deductible. We believe that this would be the intended outcome in this draft PCG.“

“We support both the choice to apply this approach in any year, the ability to change that choice in later years and the fact that this choice must apply to all advice fees paid in that year. That is a practical position to have taken.”

However, in other feedback, the FAAA noted that a footnote suggested that “Funds may also charge a fee for general advice, as defined in that section, against members’ accounts”.

“We do not believe that this is technically correct. Whilst it is possible to collectively charge members for the cost of personal financial advice as part of the member fee (i.e. Section 99F of the SIS Act) and for the cost of the provision of general advice to be incorporated within a member fee, it is not possible to directly charge members for general advice. It might be appropriate to add the words “indirectly as part of a membership fee” prior to “charge,” the FAAA said.