"On the advice of his financial planner, a retiree makes substantial contributions to a SMSF. After the event, his SMSF auditor (a qualified accountant) correctly identifies this as an excess contributions issue and advises the client to repay the funds immediately, but is required to report the breach. The ATO raises an excess contributions tax assessment in the name of the retiree and will not accept the rectification of the breach because the initial contributions were made in two tranches (ATO conclusion is 2 breaches, therefore only the first can be rectified). The ATO argue that the retiree should have understood the rules. Retiree pleads that he paid for and followed the advice of the financial planner (who under current regulations is the only one now qualified to provide this advice - but who incidentally now denies any responsibility because his tax advice was "incidental" and in any case "he is not bound by the Tax Agent Services Legislation").
Cost to the taxpayer- over $20,000 - indemnity from the planner - $Nil. Here is living proof that the ludicrous exemption of financial planners from the Tax Agent Services legislation will only lead to further risk and cost to the general public who have no protection through the courts thanks to our spineless Treasury caving in to the financial planning lobbyists in granting them exemption. Does anyone truly believe that the current "temporary" exemption will ever be removed? Or that somehow in 13 months time the appetite for further regulation of the FP industry will be any stronger than it is now? The sad irony here is that the qualified accountant who so diligently diagnosed the issue and properly advised his client is the very professional that our regulators deem unfit to provide advice in this area. What a sad indictment that our profession (we) have allowed this to happen. Perhaps we should consider a threat to boycott the audit of SMSFs if the exemption is not lifted next year!?
As a footnote, I have written to Treasury to voice concern over this very issue, and not once have I even received a response. The federal Treasurer can return a same day phone call to a used car dealer at the height of the GFC, yet an issue that is potentially affecting the retirement savings of hundreds of thousands of taxpayers is not worthy of acknowledgment even when raised by a registered tax agent, one of Treasury's own foot soldiers. Shame on you."