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Change to GST on your portfolio

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By Capital Partners Capital Partners News

For many years our clients have benefited from a little-known GST benefit on fees charged to their portfolios. The ATO has now reversed its position on this tax benefit, and this will mean the GST on your fees will soon change.

Here we explain why, how and when these changes will take place.

The Goods and Services Tax (GST) was introduced in 2000, and some product and service providers were given partial relief from GST.

Financial service providers, like Macquarie Bank, Colonial First State, BT and MLC were able to claim a credit of 75% for the GST paid on certain services which has reduced the overall cost of advice fees for their customers for many years.

Where we have recommended one of these investment platforms for you, the GST has been limited to 2.5%, rather than the usual 10%.

In December 2023 the ATO changed their view on the application of the reduced GST, stipulating that advice fees paid to your financial adviser from your investment portfolio should be charged the full rate of 10% GST.

While we are disappointed at this change, it will not be backdated and will apply from 1 July 2024.

Financial institutions and professional associations, like the Financial Advice Association of Australia, have been lobbying the Government and the ATO to uphold the original view that advice fees are eligible for the reduced GST rate. We have had no indication on the success of these appeals.

Macquarie has a private binding ruling from the ATO confirming that the reduced tax rate is valid, and they are currently still defending this ruling with the ATO.

We remain hopeful that the ATO will review their position, however, as it currently stands, we expect that the GST on your advice fees will increase from 2.5% to 10% from 1 July.

We continue to monitor this situation and are engaging with Macquarie and our professional association to lobby for a better outcome. If there are any changes, we will write to you to let you know.

If you have any questions about these changes, please reach out to your adviser.

The information provided on this site is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if these strategies and products are right for you.

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