Complying with proposed tax agents legislation would cost the financial services industry $1 billion, according to Financial Services Council (FSC) CEO John Brogden.

The Future of Financial Advice (FOFA) reforms have already cost the industry $1.5 billion, he told a parliamentary joint committee in Sydney last week.

“Our consultation… with our industry indicates that the additional cost of compliance by July 1 is $1 billion – I just had to clarify to make sure that was right,” he said.

“That is an extraordinary figure.”

FSC members are currently working on “nothing but compliance”, Mr Brogden says.

“This [agents legislation] overlaid on top would be undeniably stressful. The only thing that takes some of that pressure off is the fact there is the three-year phase-in [of the legislation].

“Without a three-year phase-in, it would be cataclysmic in terms of the industry’s capacity to be ready to roll on July 1.”

Association of Financial Advisers (AFA) COO Phil Anderson says a clearer definition of the term “financial services licensee” is needed.

“What does ‘of a kind usually given by a financial services licensee or a representative of a financial services licensee’ actually mean?” he asked the committee hearing.

The AFA understands the legislation is aimed at financial advisers, “but a financial services licensee includes a wide range of… entities and is much broader than just financial advisers”.

“Licence-holders also include product-providers, super funds, life insurers, general insurers, custodians, stockbrokers, research businesses and so on.”

It “opens up the question” of whether the legislation applies to such groups “and others who might be caught under this definition”.

The AFA wants Treasury to reconsider the definition, Mr Anderson says.

Financial Planning Association (FPA) CEO Mark Rantall says the Government is wrong to rush through the legislation before the financial advisers’ tax agent exemption expires on July 1.

“The FPA is very concerned that the priority to pass legislation is being placed ahead of appropriate legislation that is workable… legislation that is unworkable is in nobody’s best interests.”

Discussions about including advisers in the tax agent regime have been held for years, but there “were no public consultations during 2011/12 and we have had five different assistant treasurers during this process”, he said.

“It was only at the 11th hour that Treasury was permitted to commence consultation on the draft bill. This has resulted in the inappropriate and unworkable legislation you are considering today.”

The committee was due to hand down its report today.