Advisers warned on election limbo
The Association of Financial Advisers (AFA) is urging planners to be cautious in the advice they provide during the 55 days of the Federal Election campaign because of the uncertainties created by the Federal Budget on both existing and new strategies.
AFA chief executive, Brad Fox said his organisation could foresee a number of advice situations in which advice provided to clients might need to alter depending upon who ultimately won the 2 July, Federal Election.
"The Budget heralded changes that, if legislated, will significantly impact some of the financial advice strategies currently in place with some financial advice clients, as well as almost requiring "double" advice for future strategies," Fox claimed.
He said uncertainty in areas like Non-Concessional Contribution (NCC) limits, that had a retrospective element to them, meant advisers needed to tread very carefully in providing advice until a new Government is formed and the Budget measures are either passed or denied.
"We can foresee a number of advice situations where an adviser may have to explain to a client that the advice they give may change, depending on the outcome of the election," Fox said.
"This may mean saying something like — ‘if the measures announced in the Budget are adopted, then my advice to you is X, but if they do not become legislation then my advice to you is Y'."
He claimed the most significant short term impact would be on advice which requires decisions to be made or actions to be taken between now and 30 June because there will be no legislative certainty in this time period.
Just as importantly, Fox said advice strategies already in place with existing clients that required NCCs to be made from Budget night would also need to be reconsidered if an individual's contributions, including those backdated to 2007, would exceed the $500,000 NCC cap.
"Advisers need absolute clarity on the client's NCC since 2007 before allowing any further NCCs to be made. The suggested penalty consequences of getting this wrong are too large to ignore," he said.
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