The Financial Services and Credit Panel (FSCP) has handed down a written reprimand to an adviser, anonymised as “Mr U”, after finding that he provided incorrect advice on a client’s non-concessional contributions cap.
“The relevant provider gave advice in April 2023 recommending a client make a superannuation non-concessional contribution of $299,000 for the 2022–23 financial year,” the FSCP said.
“When giving the advice, the relevant provider failed to identify and take into account that the client had previously made a lump-sum non-concessional contribution of $300,000 in the 2020–21 financial year, which reduced the client’s non-concessional contribution cap to nil for the next two financial years.
“As a result of accepting the advice, the client had to withdraw $330,221.68 from their superannuation and incurred additional tax liabilities of $5,552.58 on associated earnings.”
The sitting panel determined that it “believed that the relevant provider contravened sections 961B(1), 961G and 921E(3) specifically they did not demonstrate compliance with the Code of Ethics’ value of diligence and breached Standard 5”.
Under the written direction, Mr U must engage an independent person with financial services compliance expertise, provide their details to ASIC and have the individual audit their next 10 pieces of advice that include a recommendation in relation to superannuation contribution or recontribution that are designed to take advantage of certain tax and super provisions to maximise tax benefits.
The auditor must notify the adviser of any changes in writing and the individual must enact these. If the Australian Financial Services licensee disagrees with the recommended changes, they must keep a record detailing why they withhold approval and tell the auditor of those reasons.
The auditor must then submit a report within 30 days of completing the final audit.
Other than taking no action, a written reprimand is the lowest level of action available to the FSCP.
It follows a similar finding in December last year, with the FSCP reprimanding a relevant provider for providing incorrect advice on a client’s non-concessional contributions cap.
“The relevant provider gave advice in January 2023 recommending a client make a superannuation non-concessional contribution of $329,000 in the 2022–23 financial year when the client’s non-concessional cap for that year was $220,000,” the FSCP said.
“When giving the advice, the relevant provider failed to obtain or take into account the client’s superannuation assets in the client’s PSS pension fund. As a result, the client needed to withdraw $120,735 from their superannuation and pay tax on the associated earning of $13,570.”
ATO Portal issues aside, surely you should ask the member what contributions have been made in the past three years AND get copies of the Super Fund member statements to verify the information. Wouldn’t that make sense?
Whilst agreeing the adviser should have been formally reprimanded, errors like this could arguably be avoided in adviser practitioners had access to the ATO portal.