In order to address these changes, the Australian Taxation Office (ATO) has released a draft Practical Compliance Guideline.

The first section that sets out a methodology superannuation funds can use for deductibility of financial advice fees and apportionment, however this does not apply to SMSFs as they have a limited number of members.

“Where a trustee of an SMSF pays a financial advice fee at the request, or with the consent, of a member, it is expected that the trustee will review each piece of personal advice provided to the member to determine the extent to which the financial advice fee is deductible,” the ATO guidance said.

However, SMSFs are included in the section that outlines the ATOs compliance approach in relation to a superannuation fund’s obligation to withhold from these payments for personal financial advice fees in the income years prior to 1 July 2019.

“Under the PAYG withholding regime, funds may be required to withhold amounts from payments to members that are superannuation benefits,” the guidance states.

“Under paragraph 307-10(e), the payment of a financial advice fee is excluded from the definition of a superannuation benefit if it:

• is paid by the fund at the member's direction or request, and
• relates directly to personal advice provided to the member in relation to their interest in the fund.

“The exclusion only applies from the 2019–20 income year onwards. This means, for income years prior to the 2019–20 income year, funds may have had an obligation to withhold from the payment of certain financial advice fees paid on behalf of the member (depending on the nature of the underlying arrangements between the parties). There is no time limit for us to impose a penalty for failing to withhold.”

The ATO added that the amendments are retrospective and would apply to the 2019–2020 income year and later income years.

“Our guidance will apply retrospectively to align with these amendments,” it said.

Feedback on the guidance is due by 14 February 2025.