Australian financial services licence (AFSL) holders have been caught in the crosshairs of the federal budget with licence fees set to significantly increase as a consequence of the government allocating more than $20 million to ASIC to fund its advice reforms.
As part of the government’s budget allocation, the corporate regulator has been awarded $23.9 million over four years to facilitate the implementation and enforcement of the Future of Financial Advice (FOFA) reforms.
InvestorDaily understands that in order to recover the increase in funding, application fees for AFSLs will increase by as much as 420 per cent.
Application fees for a body corporate will increase to $1485, with an individual set to face a rise of $825.
Annual lodgment fees are also on the rise, with a body corporate facing a bill of $549, up from $351, and an individual person facing a fee of $225, up from $144.
An industry insider, who declined to comment directly on the flow-on effect the government funding would have, said increases in resources to ASIC were “fully anticipated”.
Conversely, FPA chief executive Mark Rantall said the increase in fees to licensees was a concern.
“Clearly this has been positioned as a battlers’ budget and it’s about providing relief for lower-income earners and families,” Rantall said.
He said the concerning factor was that the FOFA reforms were meant to provide greater accessibility to more affordable advice.
When costs to advisers and licensees increase, so too does the administration work around the provision of advice. Such a move was counter to reducing the cost of advice, Rantall said.
He said where financial planners were experiencing difficult times due to a lack of investor confidence, there would only be one alternative to pass those costs onto consumers.
“It’s a backwards step,” he said.
One solution to counter this issue would be to enable individual advice to be tax deductable, he said.
Treasurer Wayne Swan, Assistant Treasurer David Bradbury and Financial Services and Superannuation Minister Bill Shorten said in a joint statement: “These reforms significantly increase the level of protection for retail investors that seek financial advice on how to invest their hard-earned savings and will require ASIC to increase the intensity and scope of its regulatory activities.
“In addition to enhancing the protection for consumers that seek financial advice, the financial services industry will benefit from this funding as it will enable ASIC to provide regulatory guidance about the reforms and also implement a streamlined system for applying for an Australian financial services licence.”
In total, the government has allocated more than $180 million in new funding to ASIC over the next four years.
Outside of its FOFA funding, ASIC will also receive $10.7 million over four years to develop and maintain an online registration system for auditors of self-managed superannuation funds (SMSF).
In conjunction with this funding move, the Australian Taxation Office will be receiving an additional $10.6 million over the next five years to police registered SMSF auditors and check compliance and competency standards set by ASIC.
These two allocations are to be offset by an increase to the SMSF supervisory levy, currently set at $180 a year, the fee charged to auditors if they are required to sit an exam before they register, and the actual registration fee itself.
“While they’ve said there is going to be this cost offset, they still haven’t given any indication as to how much the levy will be going up, or how much it is going to cost auditors to register, or how much it is going to cost auditors to sit the exam,” Institute of Chartered Accountants in Australia head of superannuation Liz Westover said.
“These are the questions most SMSF auditors will be asking and certainly trustees will be wondering what impact it’ll have on their levies.”
ASIC would also receive funding of $101.9 million over four years to ensure that it was appropriately resourced to continue its strong, proactive and consultative oversight of Australia’s financial markets, including surveillance, guidance and education, and the prosecution of breaches of the corporations law, it said.
The measure would support ASIC in further improving investor protection, the integrity of our financial markets, and Australia’s competitiveness as a global financial centre, it said.
The enhanced market supervision measure provides ASIC with further funding of $43.7 million over four years to replace its real-time integrated market surveillance system and enhance ASIC’s market surveillance and supervision systems and tools.
