Why the $3m super tax should see advisers given ATO portal access

One of the long-burning priorities for financial advisers has been gaining access to the Australian Taxation Office’s (ATO) Online services for agents portal.

There was a brief glimmer of hope early last year when Treasury released a consultation paper, Review of Tax Regulator Secrecy Exceptions, that sought feedback on whether the ATO should be permitted to disclose certain ATO-held information with registered financial advisers where they are providing financial (tax) advice to their clients.

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However, despite strong support and little pushback, there has been no movement on getting these changes made, even as contribution and transfer balance cap errors that could be easily avoided through portal access continually led to Financial Services and Credit Panel reprimands for advisers.

In its submission to the government’s consultation on the Better Targeted Superannuation Concessions (BTSC) bills exposure draft, the Financial Advice Association Australia (FAAA) has continued the push for access to the ATO portal.

Under the reworked version of the proposed $3 million super tax, which was initially announced in October last year, there are two new thresholds for superannuation members.

Any realised earnings generated by the portion of an individual’s total superannuation balance (TSB) that exceeds $3 million will now be taxed at 30 per cent, while a higher tax rate totalling 40 per cent would be payable on earnings from the TSB portion exceeding $10 million.

“The introduction of the Transfer Balance Cap, Total Superannuation Balance and imminent introduction of BTSC means direct knowledge of the range of client superannuation accounts, taxable income and superannuation contributions is crucial to avoid the risk of providing inappropriate financial advice,” the FAAA submission said.

“The BTSC reforms will increase the importance of a financial adviser monitoring and responding to clients potentially impacted by the Div 296 tax. This information is readily available in the ATO Portal, however financial advisers do not have access to the ATO Portal, despite being recognised tax advisers.”

In order to address this issue, the FAAA recommended that the government make “further practical changes” that would assist the implementation of both the new and existing super tax policies and give advisers portal access.

“Streamlined adviser access (subject to appropriate protections) will reduce cyber threats, the risk of inappropriate financial advice and administration time and costs,” it said.

The submission also directed Treasury to an earlier Joint Associations Working Group (JAWG) submission on the topic, which detailed how portal access would provide significant benefits for both advisers and their clients.

Indexation alignment

Looking at the details of the draft bill, the FAAA said it was supportive of a higher tax rate applying to investment earnings of large super account balances, as well as the government moving away from taxing unrealised gains and introducing indexation of the thresholds.

However, it also pushed for the supporting regulations to be released as soon as possible, as exactly how Division 296 tax will operate will “not be entirely clear” until they are.

“We note that the large superannuation balance threshold and the very large superannuation balance threshold are proposed to be indexed to the Consumer Price Index in $150,000 and $500,000 increments respectively,” it said.

“This is consistent with the indexation of the general transfer balance cap. The FAAA is supportive of this proposal.

“However, paragraph 1.32 of the Exposure Draft Explanatory Materials indicates that the timing of the indexation of the general transfer balance cap and the Division 296 thresholds may not be aligned.

“The FAAA recommends, for simplicity reasons, that these thresholds be indexed at the same time.”

The submission proposed fix that would see the the large superannuation balance threshold to be 1.5 times the general transfer balance cap and the very large superannuation balance threshold to be five times the general transfer balance cap.

“When the general transfer balance cap indexes in a $100,000 increment, automatically the Division 296 thresholds will index also, by the increments referred to above ($150,000 and $500,000 respectively),” the FAAA said.

“This proposal will help the financial advice profession and the superannuation industry generally by having a consistent ratio between the three thresholds, removing a small but important amount of unnecessary complexity, consistent with the Government’s goal to remove onerous red tape that adds to the cost of advice with no benefit to consumers.”