Our latest riskinfo poll is telling us that advisers have mixed opinions about whether any future tax deductibility of financial advice should be restricted to fee-for-service advice only.
In answer to our question:
Should tax deductibility of the cost of financial advice only apply for advice that is provided under fee-for-service models?
49% of advisers have agreed that it should only apply to fee for service, while 47% voted against the question (4% undecided).
Even though this is only a hypothetical question at the moment, this outcome is of interest when comparing with a previous riskinfo poll where 83% of respondents said they did not agree with transition to fee for service remuneration only.
So, while 83% of respondents have effectively indicted they at least want choice between commission and fee-for-service, only 47% believe that any future tax deductions on the advice provided should include commission-based fees.
While no conclusions can be drawn, this is nonetheless a possible indicator that if all financial advice fees were to be made tax deductible, it may smooth the path, in the mind of some advisers at least, in transitioning from commission to fee-for-service models.
What is there to stop planners just raising their fees and making a windfall of this?
However, some comments received from advisers suggest that if all financial advice fees were to be made tax deductible, it could result in advisers increasing their rates and see the client still paying the same amount for the advice, even after the tax deduction:
“What is there to stop planners just raising their fees and making a windfall of this? Maybe a standard maximum hourly fee needs to be included…”
We note that Tax Office rulings already allow ongoing advice to be tax deductible under certain circumstances relating to advice on income producing investments, but the focus of our question is on the possibility of all financial advice fees, including initial meetings and preparation of advice, being tax deductible.
Some key sources suggest there is only a remote possibility of the Federal Government and the ATO considering making all financial advice fees tax deductible, but the financial services industry landscape is moving towards certain change as some of the recommendations that will inevitably stem from the Ripoll and Henry Inquiries are implemented, and there exists the possibility that this could be one of them.
If you have yet to vote or to add your comments on this topic…
