Paul Healy

Property Funds Association (PFA), the peak industry body for the $125 billion Australian unlisted wholesale and retail property funds sector, has voiced concern against Victoria’s new stamp duty laws which it says will create higher operating costs for unlisted property funds.

Changes to The State Taxation Acts Amendment Act 2019 received royal assent on 18 June 2019 and incorporated significant surprise amendments to stamp duty, which is sending shockwaves through the property industry.

Paul Healy, CEO of Property Funds Association (PFA), said “Victoria’s stamp duty changes have been introduced without consultation and will likely increase costs for unlisted property funds, which may then be passed on to unlisted property investors.”

He said the new rules could impact any property transactions within a fund. “There are particular concerns over how the new stamp duty rules will apply to property transactions, and how they will apply to fund performance fees, acquisition fees, and disposal fees.

“PFA believes there needs to be more scope for exclusions or exemptions to ensure funds are able to carry out their business without being unreasonably taxed.”

Most issues centre around changes to the ‘economic entitlement provisions’ under the Victorian Duties Act. Changes include removing the 50 per cent threshold and moving most of the provisions from the ‘landholder duty’ regime into the ‘transfer duty’ regime.

Prior to the new provisions taking effect, duty was only imposed under the economic entitlement provisions where the owner of the land was a private or wholesale unit trust, or a private company, and the economic interest acquired was 50 per cent or more of the relevant economic entitlement (e.g. rent, profits, capital proceeds etc.): PFA says removing this 50 per cent threshold and removing the restrictions in the landholder regime means a much wider range of entities and activities will be caught in the stamp duty net.

Victoria’s State Revenue Office has issued administrative guidance on these new provisions, but PFA says appropriate exclusions from these new provisions should be legislative, rather than administrative. “This guidance has limited value to many unlisted property funds and does not provide adequate certainty for taxpayers as it does not have legislative force and only addresses ‘plain vanilla’ circumstances.

“In PFA’s view, further legislative amendments are warranted to provide clarification and certainty for taxpayers”, Mr Healy concluded.

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Barry Daniels

Mental health distress brought about by industry reform fatigue, constant legislative / regulatory changes and reputational damage of financial services is the unintended consequence that is contributing to many advice practitioners’ decision to terminate their careers and exit the advisory sector.

Compounding the situation is government and industry not acknowledging the very real mental health issues financial planners and their families are dealing with following so much structural change spanning the past two decades – and they have been immense!

These factors have all come together into a perfect storm scenario and many once resilient individuals are simply unable to cope – and this is being manifested in mental health issues.

The prospects of further significant industry reform beyond the Hayne Royal Commission that followed the Trowbridge Report, LIF and education requirements has exhausted many – especially mature age planners.

Hence the decision that sees so many capable planners preferring retirement to continuing their careers.  Adding to their distress, planners seeking to exit are selling practices in an environment of rapidly falling values for advice businesses.

Many planners equally had structured their retirement plans on resale values or BoLR arrangements to fund exit and retirement aspirations.  These are now in tatters.

Business brokers can attest to the mental anguish and tears of planners not only concerned for their own well-being, but those of their staff and the ongoing financial servicing of clients.

There is also angst amongst those planners with significant borrowings that funded the purchase of practices / books of clients to underpin business growth plans and provide continuity of service to the clients of the acquired businesses.

The impact on this group cannot be overstated as their plans have been completely derailed as business valuations spiral downwards as the result of pending legislation to disqualify revenues.

It’s imperative that planners that find themselves unable to cope or struggling emotionally – not to do so in silence or alone.

Anxiety is the most common mental health disorder and is often manifested by an inability to sleep, concentrate and carry out normal day-to-day tasks.

Other symptoms include feelings of helplessness, isolation, inability to cope and sense of being overwhelmed.

These can escalate into depression – in some cases even thoughts of self-harm and suicide.

It’s important for those planners that are finding it difficult to manage, that they obtain help as soon as possible.  Taking the first step can be daunting, but there are many health professionals, community groups and organisations that can help.

Many planners will be reluctant to reach out for help, fearful of being told they have a mental illness.  This fear, misunderstanding and reluctance to reach out will only delay treatment and access to support.

Finally, the number of practices sold or on the market will provide government and professional associations with a good indicator of the planners that will be left to provide advice beyond 2024.

The deeper concern is the dark side of all this industry reform which in its wake is a legacy of distressed planners with mental health issues.

By Barry Daniels, Former financial planner and Founder of PFM Australia Pty Ltd & Alliton Capital Pty Ltd

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The appointment highlights the PFA’s focus on tapping in to the industry’s top talent to deliver meaningful guidance, insight and support for the unlisted property sector.

Mr Healy has a track record of outstanding accomplishment in property investment. For the past 22 years, he has contributed to the success of BlackRock as its Managing Director and Head of the Australian Real Estate team. During his tenure at BlackRock, total property funds under management in Australia grew to over $1bn.

Jason Huljich, President of the PFA and CEO of Centuria Property Funds, said: “Paul’s acceptance of this position represents another step forward for the PFA and its members. We expect first hand benefits from his experience in a number of key areas, including continued improvement in governance and achieving best practice industry standards. The PFA recognises that supporting our members and improving the profile and performance of our sector requires a continued focus on how to do things better – and Paul can deliver real insights in this regard.”

Speaking of his appointment, Mr Healy said: “The PFA is the peak professional body for the unlisted property sector and as such, one whose importance I have always recognised. I look forward to playing an active role in strengthening its ability to promote and support investment in unlisted wholesale and retail property funds, improving the commercial environment in which our members operate and developing a more unified association with strong membership benefits.”

The PFA remit is to represent and further the interests of direct property investors and managers, including through industry promotion, research and education.

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