According to the FSC, tax reform has the capacity to re-invigorate growth in the Australian economy, and the financial services industry would “welcome and participate in a holistic, evidence-based tax review”.

The priorities document pushed for any review of tax settings to consider the appropriateness of the overall tax burden and levels of government spending, as well as examining the relative efficiency and distribution of taxes.

“Australia’s reliance on direct taxes, including a company tax rate that is internationally uncompetitive and increasingly onerous personal income taxes, should be examined, along with opportunities to remove inefficient state taxes,” it said.

FSC chief executive Blake Briggs added: “A mature tax reform debate requires all options to be left on the table, including taxes on superannuation, the company tax rate and the GST.

“The history of superannuation tax changes under both major parties has been tinkering that undermines confidence in the system. If the major parties do not commit to a holistic, evidence-based tax review, the FSC calls on both sides of politics to rule out changes to superannuation taxes.”

The industry body argued that frequent changes to super’s tax settings – including the introduction of the transfer balance cap, Division 293 tax on high-income earners, regular changes to contribution caps, and the proposed Division 296 tax – have eroded confidence in the system, created uncertainty for consumers and added complexity for industry.

“Piecemeal tax changes generate poor policy design, such as the proposed application of the Division 296 tax on unrealised gains, taxing Australians on the increase of the value of assets they have not yet sold,” the FSC said.

“When Australians contribute to their retirement by saving through superannuation, they do so with the expectation that tax policy settings will be fair and broadly stable.”

It also argued that regulation around superannuation has been evolving to be “default-centric” and failing to recognise the varying levels of engagement among members.

“Default-centric regulation, that displaces legitimate consumer choices and consumers’ financial advisers, works against Australians being engaged with their retirement,” the report said.

“The FSC believes that the superannuation system should be built on the principle of encouraging superannuation customers to be engaged with their superannuation and make active choices that suit their individual needs.

“Consumers should be provided with tools, guidance, and where required, access to affordable advice to help them make individual decisions for their specific circumstances.”

QAR, CSLR, and education

On the advice front, the immediate implementation of the Quality of Advice Review’s (QAR) recommendations and a “comprehensive review” of the operation of the Compensation Scheme of Last Resort (CSLR) headlined the FSC’s proposals.

“The financial advice industry has dramatically reduced within the last decade from a peak of 28,000 financial advisers in 2018 to around 15,600 advisers more recently,” Briggs said.

“Without reform to encourage investment in advice businesses, the sector will not have the capacity to provide valuable financial advice to the 2.5 million Australians who will retire over the next 10 years.”

In line with this, the FSC said implementing the QAR immediately could help cut through the regulatory red tape that “do not enhance the customer experience” and has led to the ballooning cost of advice.

“Noting the government’s announcement around the Delivering Better Financial Outcomes Tranche 2 reform package, both major parties should commit to finalising the implementation of the Quality of Advice Review to grow jobs in the financial advice sector and make it easier for Australians to access affordable financial advice,” it said.

“Reforms should also consider the role of digital advice solutions to enhance efficiency, lower cost, and complement the provision of person-to-person advice.”

Last week, the Financial Advice Association Australia (FAAA) released freedom of information (FOI) documents that show a timely impact analysis of the CSLR was likely to not have been undertaken.

“We are calling for the government to acknowledge the scale of the exposure the financial advice profession faces and to undertake an urgently needed review of the CSLR legislation, to ensure that the CSLR is fairly and sustainably funded,” FAAA CEO Sarah Abood said.

Similarly, the FSC has also pushed for a comprehensive review of the operation of the CSLR to “ensure efficiency and prevent unsustainable cost for industry”.

This would include:

• Reviewing the administration costs of the CSLR.
• Considering government contributions.
• Considering appropriate capping of industry contributions that reduce cost uncertainty.
• Reviewing arrangements like solvency, liquidity, insurance, capital and risk management requirements which prevent firms from collapsing or failing to meet obligations like compensation payments if required.

“Consumers should also only be compensated for their actual losses, instead of compensating them for hypothetical foregone gains, which prevents the CSLR from being truly a scheme of last resort,” the FSC added, in line with its submission to the Dixon Advisory Senate inquiry.

Beyond the QAR and CSLR, the election priorities document also argued that reforming the “unduly prohibitive” education requirements for financial advisers could boost new entrants to the profession.

“Most young people at university study a generalist degree such as commerce, business, or economics, but have competency in some topic areas that are relevant to financial advice,” the FSC said.

“The pathway to becoming a financial adviser should not be limited to people who have completed a financial planning degree and instead should be flexible enough to accommodate new entrants and career changers by having elements of their pre-existing degree courses recognised, while maintaining appropriate qualification levels to ensure consumer protection.”

This should be extended to the proposed new class of adviser, it added, with the development of “appropriate pathways” to becoming relevant provider over time.

“Reforming the education requirements could increase the future supply of advisers, which could lead to lower growth in costs in advice, which have increased by 58 per cent between 2018 to 2023,” it said.