A recent ifa straw poll found that 95.8 per cent of respondents believe the government should introduce a tax rebate for financial advisers, with just 4.2 per cent of the 1202 survey participants opposing the measure.
Speaking to ifa, chief executive of the Institute of Public Accountants Andrew Conway said the issue of tax deductibility for financial advice is relevant now more than ever.
“The deductibility issue has become more relevant as advisers must now charge an upfront fee rather than receiving commissions directly from the product providers,” he said.
“As less than 20 per cent of the population use the services of a financial adviser, we believe that tax deductibility would encourage more people to use such services. In the long run if people better plan for their retirement, the government will be a beneficiary as there will be less reliance on people seeking age pension support, so the short-term cost can be outweighed over time.”
Lifetime Financial Group senior adviser Hugo Sampson told ifa the expectation that a layperson can fully understand all the options available to them for retiring, let alone formulate the optimum retirement plan, is ludicrous.
“Navigating this [retirement] minefield is hard enough and to let the layperson interpret the ever-changing legislative landscape is playing with fire,” Mr Sampson said.
“Providing tax deductions for costs relating to financial plans and associated implementation, not just ongoing advice fees, would see ordinary Australians incentivised to seek qualified financial assistance.
“This would make many more Australian’s less reliant on government assistance after their working life.”
Managing director and principal adviser at Meridian Wealth Management Paul Dunn told ifa, “Under the current legislation, if the advice is to establish a plan or the advice does not relate to assets that generate taxable income, then the advice fees are a capital expense and not tax deductible. If the expense is in relation to ongoing advice and management of an existing portfolio then the expenses are generally deductible.
“Superannuation rules are complex and planning for retirement requires the time and ongoing guidance of a professional adviser over the long-term. If the government are seriously concerned with the long-term financial stress on our social security system and the tax revenue that underpins it, then they need to take off the short-term blinkers and make financial advice fees 100 per cent deductible.”
VISIS Private Wealth partner Chris Smith said, “All financial advice relating to wealth management and creation should be tax deductible as the basis for the advice is the generation of income and gains to further develop an individual’s financial position.”
However, another adviser, speaking to ifa on condition of anonymity, described his peers supporting tax-deductibility as “rent-seekers”.
This is a simple equation – just like all tax deductibility. If the advice is about generating taxable income and invoiced each time then it’s tax deductible. If it’s advice of a capital nature then fees may be deductible against (taxable) capital gains…but if there is nothing taxable then there can be no deduction against zero taxable income…as is the case for superannuation. For SMSF, if the fund pays the fees then it may claim a deduction against either income or gains (depending on the nature of advice about income or capital) but no deduction would apply for a pension fund – which is all non-taxable. Advice must first of all be good value. If it is only good value if there’s a taxpayer subsidy then it’s probably not good value OR the adviser is just not capable of explaining its value. BTW – who is going to pay for the roads, bridges, welfare etc if we keep driving taxes down all the time?
And who will pick the cotton when we free the slaves?
The reason this has dragged on for so long is that its makes common sense to make it tax deductible but as we know common sense is not that common.
It will never happen. Put your energy into something more useful, such as reducing red-tape and shortening SOAs (eg. 3 pages max.). That would reduce the cost of advice without damaging the Federal Budget, which is already stretched.
Yes this should be the case and yes I agree with this proposal. The fact that this has not been the case now is beyond silly. As advisers we are under TASA. A body that represents tax agents and advisers. As a tax agent myself, I find it silly that I can charge a client for tax advice and they may claim this on their next return, yet as a financial adviser dealing with clients on a matter of a tax nature and planning as required, I cannot have a client claim my fee as a deduction unless the advice is an ongoing fee and that there is income derived from the underlying portfolio not of a superannuation or retirement product nature. Stupid. But hey, for the last 30 years, government has been inept and mostly incompetent in policy design. Tax, Centrelink, the Aged care sector, financial planning ASIC , superannuation and the list goes on and on.
I agree that allowing deductions for advice will see more patronage to advisers and a better outcome from a fiscal viewpoint going forward. Long term matters such as the cost of the social security budget and ageing will come down as more and more seek and can afford advice to get the outcome they deserve. But if you were in office, focused on short term outcomes with nothing other than revenue on your mind and debt and deficit as your focus, the last thing you need is an educated bunch of voters educated by good advisers to thwart the short term thinking that then compels government regardless of persuasion to sting the taxpayer now and kick the can down the road. No vision in 30 years has got us to where we are now. Unless this changes in government, no vision is where we will be as time passes. Good luck with the deduction idea. This takes vision, our leaders are in very very short supply of.