Australia's financial planning sector needs to take greater responsibility in alerting clients to the risks of excess superannuation contributions to lessen the fallout from tax penalties and shift potential liability, according to a superannuation expert.
Argyle Lawyers principal Peter Bobbin has urged financial advisers to "get the message out" to clients about the implications of excess super contributions.
"Excess super contributions are a major problem," Bobbin told a Macquarie briefing yesterday.
He said figures released by the Australian Taxation Office (ATO) since 2008 further highlighted the problem.
In 2008, the ATO found about 39,000 people had an excess super tax contribution, in 2009 it was about 28,000 and in 2010 it was 65,000 people, he said.
"Definitively it is the caps that are causing it. When the federal Labor government halved the caps in essence what they do is rely on accountants and the financial services industry to tell Australians," he said.
"They don't tell Australians what they are doing, they are expecting Australians to read the budget, they don't. Excess contributions tax is taking money away from people and it's impacting on people's retirement."
He said planners had three months to inform their clients of whatever contributions the client had made over a three-year period.
"People blame advisers for excess contributions tax problems and let's say for some that's true. The interesting thing though is if a person does it themselves, they've got nobody to fall back on," he said.
"If they get advice from any other professional, they may not have anything to fall back on. If you get advice from a financial planner, you've got a whole regulatory regime that provides the support, including putting an application into FOS (Financial Ombudsman Service) to be compensated."
He said by advisers alerting clients to their contributions it was a way to avoid personal negligence.
"You shift the liability to where it should be, which is on the client. So you alert the client, you urge the client, you encourage the client," he said.
