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GST decision could lead to higher fees

Fund managers' clients will end up bearing the brunt of increased costs if the IRD goes ahead with changes to their GST treatment, it has been claimed.

Wednesday, December 9th 2015, 6:00AM

by Susan Edmunds

The IRD is proposing making fund management fees GST-free.

At present, the tax is levied on 10 per cent of fund fees.

The change would mean that fund managers would not be able to claim GST back on the payments they made to other suppliers.

That would be disproportionately painful for boutique managers who do not have the scope to move their GST claims to other parts of the business.

Rebecca Thomas, of Mint Asset Management, said it would be consumers who would suffer if the changes went ahead.

She said while outsourced fund management was best practice from a regulatory perspective, such a change would mean it was tax disadvantaged.

Big firms would be in a better position than boutiques, as would international operators.

"What does that do to the competitive landscape?"

It would mean they would ultimately have to boost fees for clients, she said.

“Fund managers have a whole load of costs that they won’t be able to pass on.”

Mint and a group of other boutiques have hired Ernst Young to present a technical submission on their interpretation of the law.

She said each would also make individual submissions to argue their case, either to retain the existing arrangement or increase GST.

“However you interpret the law you could end up with unintended consequences that are not good from a policy point of view.”

Tags: funds management

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