Tax changes to financial services supply will increase costs

The Association of Superannuation Funds of Australia (ASFA) has warned that any move by the Government to change the taxation regime surrounding the supply of financial services to a more principles-based approach will carry with it the danger of market disruption and higher compliance costs.

In a submission responding to a Treasury consultation paper reviewing the Goods and Services Act’s financial supply provisions, ASFA said it did not support the replacement of the existing regime with a principles-based approach.

It said it also did not support a reduction in the 75 per cent rate applicable to reduced input tax credits in the present rules, which it said would then need to be met from members’ accounts and would thus need to be reflected in either higher fees to members or reduced investment returns.

The ASFA submission said while it had some concerns about the complexity of the financial supply provisions, having lived with them for nine years the initial complexities and confusions had been progressively worked through.

“At considerable expense, organisations have educated their staff on the operations of the provision and have implemented appropriate IT systems and an appropriate risk management framework,” it said. “The replacement of the existing law with a set of principles would likely involve significant cost, especially with respect to the reimplementation of what is largely a settled area of tax law.”