The revised bring-forward rules for non-concessional contributions (NCC) are highly likely to catch out SMSF advisers and trustees as year-end reporting approaches, according to a specialist sector lawyer.
“We have to be very mindful of people who slip up at year-end as there are always year-end issues, so be prepared for them,” DBA Lawyers director Dan Butler told the firm’s SMSF Strategy Seminar in Sydney today.
“We really have a recipe for disaster and I really predict a lot of stuff-ups because Treasury has made the revised bring-forward rules far too complex.
“There is a one-year, a two-year or a three-year NCC bring-forward, but this is all dependent on your total super balance, and getting your total super balance is a bit of science all on its own – we really have to drill down into it.
“So there are all these elements of complexities coming together to conspire and potentially trip our clients up.”
Butler said the bring-forward NCC had become a highly complex discussion point for advisers and their clients.
“Clients are getting very confused and may not remember what they did two years ago, let alone one year ago,” he said.
“Advisers will also need to cover themselves with correct Australian financial services licence requirements and also tax advice.
“And if you predict anything more than what’s going on in this financial year, you’re a brave person in this industry.”
While Treasury’s NCC chart for the bring-forward rules appeared simple and straightforward, it concealed the complexity behind them from an advice standpoint, he warned.
“The legislation is complex and here’s where the tripwires come in: you’ve got clients out there where you’ve given them advice in the past, particularly if you’ve set up the three-year bring-forward and they’re still acting on that advice, but we know of advisers and firms that are being sued for putting out prior advice but haven’t gone back to their clients to inform them the rules have changed,” he revealed.
“As a law firm, we have a lot of one-off touchpoints with our clients so we have to say in our disclaimer that the client has paid for a specific piece of advice and if they want to be kept up-to-date and be advised for changes down the track, they will need to enter into a yearly consultancy arrangement.”
To add further complexity to the NCC bring-forward rules, advisers also need to take into account the transitioning provisions, dependent on what financial year the bring-forward was invoked, he noted.
“We are going to have a lot of casualties with our client base, potentially,” he said.
“You’ve really got to get back to your statements of advice, your templates and your advice that’s already out there, and don’t think about 30 June planning, think about the now because there are time bombs waiting to go off, so we have to really get onto our clients.”