In an exclusive interview with ifa, the Assistant Treasurer said the amendments to the FOFA legislation are, in part, aimed at facilitating more “affordable financial advice” services for Australians to plan for “their future with certainty”.
However, asked whether the government would go a step further and make financial advice services tax-deductible, Senator Sinodinos said such an initiative is not a possibility in the current fiscal climate.
“I’m not contemplating tax-deductibility of financial advice,” Mr Sinodinos said. “You can often look at things in isolation and say, well, that sounds a good idea on its merits because there are social costs and benefits in doing it, or economic benefits in doing it, but the challenge for us in the period ahead is that we have to look at the Budget as a whole.
“When I and Joe Hockey and others sit down and look at the state of the Budget, our focus has to be over the next 12 to 18 months putting in place the measures to get the Budget back into surplus in a reasonable timeframe, and that does mean it’s very hard to commit to new measures.”
Channelling former Treasurer Peter Costello, Mr Sinodinos said the “best saving you’ll make is the spending you don’t undertake”, but continued that making amendments to the FOFA legislation – and “making sure the savings in the legislation get passed on to consumers” – will help the stated goal of growing the number of Australians in professional advice relationships.
The comments came ahead of a call from the Financial Planning Association – seconded by a number of ifa readers – to bring in tax-deductible advice fees in its submission to the federal Budget yesterday.
Philip, initial advice fees are not tax deductible. This is despite the fact that a tax deduction at this stage would lower the barrier to comprehensive financial advice for retail investors in Australia. I would agree with your comments about the value of fee-for-service though.
Then perhaps Mr Sinodinos can scrap this ridiculous plan to turn all financial planners into tax agents. It is an utter waste of time and resources, with zero benefit for consumers.
Fees paid for services and advice that are related to incurring taxable income already ARE tax deductible. What are NOT tax deductible are trailing commissions (quite rightly pointed out by “Tax exile” as already claimed/deducted at the source as managers’ fees)as they can’t be claimed twice.
All this is further reason why the fee-for-service model works best for all. But even then, fees for advice not connected to generation of taxable income are not claimable(i.e. for personal super advice, as opposed to SMSF advice, which may be paid by the SMSF and claimed as a deduction).
I know Gav will have conniptions but what is clear here is that Fee For Service, invoiced by the adviser and paid by the client is simple, effective, tax-effective and transparent… Just saying.
Old story! Governments would rather maximize their political position now as opposed to later despite the financial sense the right decision would make now. In this scenario giving up a few fiscal dollars in achieving the stated goal of making advice more affordable, the authorities will overlook this concession despite clear indications that those who seek financial advice are more likely to have a self-funded retirement and less likely to rely on social security funded by the tax payers. Such a sad view and definitely not in the BEST INTERESTS of the Australian economy.
It has always been my understanding that initial fees for advice were not deductible as there was no nexus between incurring the expense and earning assessable income. Once an investment portfolio is in place, provided the ongoing fees are “necessarily incurred in earning the investment income” surely they would be deductible? Not sure how this might apply to institutional super accounts, but an SMSF would surely deduct fees “necessarily incurred”. Are the management fees charged by a real estate agent for managing a rental proprety deductible? I would believe so and argue: What is the difference?
Unreal. Firstly, how has he managed to respond in 24 hours?
Secondly, is it not the case that investment management fees from which trailers are paid, are in fact deductible against investment income?
So why would the Senator not look at this and take the time to consider whether there’s an opportunity to bring the overall tax code in line with FOFA policy intent? And if their objective is to make advice more affordable, winding back the ability to deduct trailers will more than cover the revenue dilution from deduction of advice fees.