SMSF trustees need to be made aware they have added responsibilities to check the nature of advice provided to members that is paid for by their fund under changes to superannuation and tax laws implemented last year.
Institute of Financial Professional Australia (IFPA) head of superannuation and financial services Natasha Panagis said the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024 introduced changes to the Superannuation Industry (Supervision) Act that allow financial advice fees to be paid from super and a tax deduction claimed for them.
As a result of this change, the ATO has released a draft practical compliance guideline (PCG) as to what superannuation funds, including SMSFs and their trustees, will be required to do when a fund member makes such a request.
“This PCG is going to apply to large funds when they are looking at how to determine the extent of the payments of financial advice fees to be taken out of a member’s account in terms of tax deductibility,” Panagis said during a recent online discussion with IFPA members.
“The ATO is also saying although this does apply to large funds, where a trustee of an SMSF is paying advice fees at the request or consent of a member, then it’s expected the trustee will review each piece of personal advice provided to the member to determine the extent to which the financial advice fees are deductible.
“So that’s going to be on the trustee to determine, based on the member’s request, whether they do that and what the deductible component will be.
“The PCG is also stating that a fund can claim a deduction for an amount paid by the fund where it is a cost because the provision of personal advice is about the member’s interests, it has been requested by the member and the fund has a copy of that consent.
“Additionally, for the fee to be deductible to the fund, it has to be wholly incurred in relation to gaining or producing the fund’s assessable income.
“If it’s a fee coming out of the member’s retirement-phase account, that will not be deductible, whereas if the fee is paid from or charged to a member’s accumulation account, that can be regarded as being incurred in relation to gaining or producing assessable income.
“This is what the ATO has put out in their draft compliance guidelines and it will be finalised in due course, but in case you have clients looking to deduct fees from their members’ accounts, remember there’s a process involved in terms of deductibility.”
