GST reduced input tax credits: Funds claiming RITCs for GST on adviser services

With changes to the regulatory environment and increased scrutiny of adviser fee arrangements, the Commissioner has narrowed the scope for funds to claim RITCs for certain adviser services. Going forward, changes to fund fee structures and procedures may be needed.

On 13 December 2023, the ATO issued a document putting superannuation funds and IDPS platforms (funds) on notice that in a change to some longstanding industry practices, certain investor specific adviser services arrangements may not give rise to RITC entitlements to the fund. Funds will need to consider their arrangement carefully to determine if their GST treatment needs to change going forward.

Adviser services arrangements

Relevant adviser services arrangements include the following features:

• An individual (or other entity) engages an adviser to provide them with personal finance advice about the individual’s interest (current or prospective) in the fund.
• The fund is authorised to pay the fees, by deducting the amount from the individual’s interest held for them in the fund.
• If the fund does not pay the fees, the individual remains liable to pay the adviser.

The Commissioner considers that the fund does not receive the supply of advice under such an arrangement, and therefore does not make an acquisition on which it can recover GST or RITCs.

What will change and when?

The ATO notes this view is consistent with the Commissioner’s existing guidance in relation to supplies, including in relation to tripartite arrangements. However, in recognition that past binding private advice may have contributed to incorrect RITC claims in the industry, the ATO is taking a prospective compliance approach for fees paid under adviser services arrangements up to and including 31 March 2024.

What does this mean for taxpayers?

All superannuation funds and IDPS investor platforms with adviser arrangements should review their arrangements to ensure that RITCs are only being claimed where there is an entitlement to do so. Where a fund has arrangements addressed by this notice, changes may be needed going forward.

The ATO expressly notes that funds with private rulings should check whether their ruling is still valid, and the facts accurately reflect their current contractual arrangements.

Remaining up to date with GST updates and the relevant implications for you can be challenging without the right guidance. If you require assistance with identifying or correcting any GST errors, please get in touch with Grant Thornton’s indirect tax experts in the new year to ensure your fund is compliant with the ATO view ready for 1 April 2024.

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