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Issue 115, 17
November 2005
Welcome to the latest issue of Thomson’s
Tax & Accounting Insight, your free news service for tax
and accounting professionals.
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Articles
in this edition include:
Editorial
Enquiries:
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Dumping super taxes more popular than income tax cut: ASFA
According to research commissioned by the Association of
Superannuation Funds of Australia Limited (ASFA), 75% of people
questioned said they’d prefer to get rid of the superannuation
contributions tax, rather than another income tax cut of $6 per
week. ASFA, therefore, claims that removing the contributions tax
on super would be a popular choice and would do far more for our
ageing population and likely future needs than another round of
personal tax cuts.
The research also uncovered a substantial appetite for higher
retirement savings. In a key finding, three in ten people said
they would consider salary sacrifice and five in ten would
consider trading part of a future wage increase for more super.
This figure rose to three in four if the government were to match
their super contributions up to a certain amount.
In this regard, the research also revealed that there was a
high awareness (80%) among the respondents to the super
co-contribution introduced by the government in 2003/04, with 11%
reporting that they had personally received it. However, the
research also showed there is a strong case for broadening its
reach.
ASFA concludes that the results of the research point to what
needs to be done to encourage saving for retirement, namely:
abolish the super contributions tax; encourage government to consider expanding the
co-contribution arrangements to help raise savings among
middle income earners; and examine the current impediments to saving via salary
sacrificing.
The results of the research can be viewed on the ASFA website
— click
here
This article first appeared in Thomson’s Super News Alert.
For more information, click
here.
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Call for simpler super choice as cases of ‘mis-selling’ revealed
The shadow Minister for Superannuation, Senator Nick Sherry,
claims that the ‘Super Choice’ legislation is badly designed,
too complex and unsafe. This follows a Senate Committee hearing
with the regulator, ASIC, on 9 November 2005, in which the
following examples of superannuation ‘mis-selling’ were
revealed:
a couple with $6,110 in a fund convinced to roll into a new
fund were charged a total of $1,157.52, or 19%, in exit and
entry fees, plus a $5,719 a year new insurance fee; a man switched within a fund and was charged a 3% entry fee
when no switch had occurred; a woman with $26,000 in a fund switched at a cost of $782
based on an advised need for extra insurance required when no
such insurance was necessary; and a man switched from an existing fund with low fees into a
new fund with higher fees and a 4.5% entry fee based on an
advised need for $250,000 insurance when no such insurance was
necessary.
In addition, Senator Sherry claims that the central protection
of ‘disclosure’ in the form of the issuing of a 50–100 page
disclosure statement is useless. As a result he claims ASIC ends
up playing catch-up, struggling to prevent mis-selling after it
occurs. He also said that it was very worrying that only one case
heard by the Senate Committee resulted from consumer complaint.
Accordingly, Senator Sherry argues for a simpler and safer ‘Super
Choice’ regime that includes simple, standard and readable
disclosure statements of no more than two to three pages. In
addition, he has called for tougher regulation on some types of
fees such as exit and entry fees.
This article first appeared in Thomson’s Super News Alert.
For more information, click
here.
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Accounting bodies’ standard for financial advice
CPA Australia and the Institute of Chartered Accountants in
Australian (ICAA) have released a joint professional standard
governing the provision of financial advice by their members.
While the standard (Statement of Financial Advisory Service
Standards (APS 12)) does not mandate the use of fee-for-service in
the provision of financial advice, it states that fees should be
the ‘preferred method of remuneration’. Importantly, the
standard bans advisers from receiving certain gifts and
sponsorship as a result of achieving specific sales targets, known
as ‘soft dollar commissions’. In addition, the standard bans
heavy initial-fee discounting to avoid recovery through subsequent
higher fees and commissions.
ICAA Manager Financial Planning and Superannuation, Hugh Elvy,
said the introduction of these standards will assist the
profession to meet its obligation to uphold the public interest by
ensuring the highest quality of advice.
CPA Australia Financial Planning Manager, Chris Benson, said
members of the professional accounting bodies will be required to:
provide clients with a terms-of-engagement agreement that
clearly outlines fees, deliverables and timeframes prior to
commencement of work; provide clients with clear terms that explain the cost of
the initial and ongoing advice; disclose buyers of last-resort arrangements, as such
arrangements are often linked to preference for certain
products; and fully disclose any conflicts of interest that cannot
otherwise be avoided.
Date of effect
The standard is effective from 1 November 2005. The
professional bodies warn that failure to comply with the standard
may lead to disciplinary proceedings.
APS 12 is available on the ICAA website at <http://www.icaa.org.au/upload/download/APS12_Oct05.pdf>,
and on the CPA Australia website at <http://www.cpaaustralia.com.au>.
This article first appeared in Thomson’s Superannuation
& Financial Services Bulletin. For more information, click
here.
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