Issue 

The GST category for Adviser fees in Class used to default to Reduced Credit Acquisition but as at 20 April 2024 display as Non-Creditable Acquisition.

Cause

The ATO recently published a view on eligibility of entities to claim RITC on Adviser fees when they are undertaking investor directed portfolio services. For more information and details about the adviser fees arrangement, please refer to the ATO’s publication here. 

A summary of The Commissioner of ATO views, as relating to entities on Class for two different arrangements of adviser fees through Investor-Directed Portfolio Services (IDPS), is below:

• Adviser Fees Arrangement A
  Description: IDPS engages an adviser to provide non-ongoing, simple advice to its members, where a fee is collectively charged to all members (referred to as intra-fund advice).
  
  Treatment: The Commissioner of ATO is silent on the RITC treatment, but it is believed that the treatment of the RITC is continuously unaffected at the industry level.
  
  
• Adviser Fees Arrangement B
  Description: Where a financial adviser was engaged to provide personal advice and the financial  adviser was authorised to collect their adviser fees through the IDPS, the entity will not be eligible to claim RITCs for the adviser services fees because IDPS is not the recipient of a supply. This view is consistent with the Commissioner’s existing guidance in Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies, including tripartite agreements.
  
  Treatment: The Commissioner recommends that IDPS review their arrangements for the payment of adviser fees to ensure RITC is not being claimed when there is no entitlement.

Resolution

Class has changed the GST category of the Adviser Fees (Business level/scope) to Non-Creditable Acquisition as the default settings for all our clients from 20 April 2024. All transactions processed after the date will have the new GST category.

At the Business level, you can override the default classification type for income and expense accounts or create new ones. If you choose this option, you can find instructions on how to do this in the Help article here.

Caution should be taken when overriding business level default Income and Expense accounts as this will impact all entities in the Class business.