CGT relief to prompt licensing rush

The financial planning industry is expecting a rush of applications for licenses under the new Financial Services Reform Act (FSRA) after the announcement of special capital gains tax (CGT) relief measures for advisers and their dealer groups.

The minister for revenue and assistant treasurer, Senator Helen Coonan, announced last week the Government would allow an automatic capital gains tax (CGT) rollover for advisers and other financial services providers transitioning across to the new Financial Services Reform Act (FSRA) regime.

Coonan said the changes were made in response to industry fears that the process of transitioning to the new licensing regime could trigger a CGT event.

The national manager of policy and government relations at theFinancial Planning Association (FPA), Con Hristodoulidis, says the announcement could prompt a rush of new licensing application by dealer groups.

“One of the main reasons why dealer groups haven’t been transitioning to the new licensing regime is that there was this uncertainty over whether there would be automatic CGT relief,” he says.

The tax relief will apply when one intangible CGT asset is replaced by another intangible CGT asset as a result of a financial services provider moving to a new licence under the FSRA regime.

Under the measures, recognition of a CGT gain or loss will be deferred until a CGT event happens to the replacement asset under the new licence.

Assets acquired before the 20th of September 1985 will also maintain their ‘pre-CGT’ status under the new rules.

Coonan announced the measures while addressing the Sydney chapter of the FPA last Friday, where she also weighed into the debate over the findings of the combinedAustralian Securities and Investments Commission (ASIC)/ Australian Consumers Association (ACA) report into the quality of financial planning advice.

In stark contrast to both the ACA and ASIC response to the report, Coonan said the findings were “disappointing”, but that a few “bad apples” should not taint all financial planners.

“All professions have their bad apples, or under-performers and while the results are concerning, we should not paint the entire adviser profession with the same brush,” Coonan said.

Coonan also hit out at calls by the ACA for choice of superannuation fund legislation to be put on hold until concerns raised in the report about the financial planning industry are addressed.

“There has been some commentary that following the release of the ASIC / ACA survey, choice should not proceed,” Coonan said.

“However this is a very curious train of logic. It suggests that consumers are best served by having no choice, and potentially being trapped in a poorly performing fund.”