The Institute of Public Accountants has called for all costs related to financial planning advice tax deductible, as upcoming regulatory changes could impact the number of consumers seeking financial advice.
In its pre-Budget submission, the IPA said the removal of commission structures from new product advice contracts under Future of Financial Advice (FOFA) changes means advisers will no longer be able to charge in a way that is tied to performance.
“Investment advice is non-deductible, but when it was buried in commissions you got the tax deduction by default,” IPA senior tax adviser Tony Greco told ifa.
“But from 1 July the whole game changes.”
In its submission, the IPA said there is a strong case to support making all advice costs tax deductible.
The Australian Taxation Office (ATO) currently makes a distinction between a fee for drawing up a financial plan and fees for management or annual retainers. Expenses relating to drawing up a financial plan are deemed by the ATO not to be incurred through gaining income, but rather are an expense of putting the income earning investments in place, according to the IPA.
“Allowing initial fees to be tax deductible would considerably assist consumer access to affordable financial advice,” the IPA stated.
“As it stands, the absence of a tax deduction for these fees discourages many Australians from pursuing important strategic advice which will assist in their organisation of finances and financial independence. Increased financial independence will reduce demands on public funding.”
The measure would increase the number of Australians seeking advice, according to the IPA.
The new limited licensing regime under FOFA will provide an “ideal” opportunity for accountants to provide strategic, affordable, non-product financial advice. Although making advice tax deductible will carry a cost to the Government, this would be significantly outweighed by the longer-term benefits of helping taxpayers plan for retirement, the IPA stated.
“FOFA was about making advice more accessible; the missing bit is it would be nice to get a tax deduction for up front advice,” Greco said.
That would soften the blow and encourage more people to visit a financial planner, he said.
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