Last month, the Australian Taxation Office (ATO) announced a consultation process into the tax deductibility of financial advice fees. FPA CEO Sarah Abood called the news a “game-changer”.
But making advice affordable is not really a priority for financial planners — it’s an issue for policymakers, lawyers and industry groups. I’ve written before about the push to make advice more affordable and accessible. It is not being driven by advisers, many of whom are turning clients away.
Demand is not the problem. There are plenty of Australians who want financial advice. The issue is one of supply.
Making advice tax deductible could create a surge in demand without addressing this supply issue. It will also reduce the cost to the consumer while doing little for the adviser. In fact, there is very little benefit to advisers at all. They will still face the same regulatory and compliance costs and ASIC fees.
Making advice tax deductible is a decision that needs to be considered from industry as well as a consumer perspective. It’s no good unleashing a batch of new enquiries on planning practises across the country if they are already struggling to service the clients they have and remain profitable.
If affordability of advice is such a focus, then there must be real changes made at a policy level to reduce the cost of producing advice, rather than simply consuming it.
Industry associations, government inquiries and lawyers are so hellbent on making advice affordable for consumers that they overlook what the practitioners of advice actually need in order to deliver it. In the last 10 years, the industry has become so regulated and wrapped up in red tape that it is basically a cottage industry now. It seems the harder the powers that be try to make advice accessible, the fewer the number of consumers who actually benefit from it. There is almost an inverse relationship between the number of policymakers meddling with advice and the number of Australians receiving advice, as well as the number of advisers themselves.
Nobody will argue with the notion of affordable, accessible financial advice for as many Australians as possible. It’s a swell idea. But it’s just not realistic. And increasing the demand for advice without increasing the supply of it makes no sense at all.
There is also a danger that a new ATO tax ruling could be hijacked by the major banks and super funds. It wouldn’t surprise me if they become the loudest voices promoting their own versions of advice as a tax-deductible service.
This is so overdue since like Federation!
The answer is YES.
Upfront, ongoing, one off…… all tax deductible, at every level.
“game changer”…. doubt it …..and if such a “game changer” then why 30 plus years of advice being not tax deductible? We know the answer to that question and it’s Accountants protecting their turf as opposed to doing the right thing. But really game changer ? People who can afford financial advice don’t pay tax. Only game changer is to the Adviser ripping off Pitt Street CEO’s charging $20,000 plus. Pre retiree’s can’t afford advice full stop and post retiree’s don’t pay tax.
Making advice tax deductible is not going to solve the advice problem, for starters the huge number of retirees who need advice pay little if any income tax.
Making advice more affordable would be more beneficial to most people so maybe a subsidy is the way to go and certainly reducing costs on advisers would help.
Deductible advice fees will help some clients but is of little benefit to a client in tax-free pension mode. The key change needed to increase the level of advice service is to eliminate annual fee renewal consent forms, that do not exist in any other nation on earth, apart from Australia. It’s the time poor working families that need help, but this regulatory red tape is ensuring they will remain unsupported.
Nail…Head!
Making ongoing advice tax deductible would help. At the moment we have advice from our accountants that unless investing in something that is generating an income, ongoing advice is not tax deductible. Therefore there are advantages in taking the fee from super which is subject to a 15% tax deduction. This goes against one of the royal commission recommendations and also opens up SIS Act sole purpose test rules, if providing advice in other areas such as cashflow advice. So yes please arrange advice tax deductible to make it easier for advisers to charge a fee outside of superannuation.