Renewed Call for Tax Deductible Financial Advice

The Institute of Public Accountants (IPA) has used its annual Federal Budget submission to renew the push for the cost of financial advice to be made tax deductible.

According to the IPA, the current tax rules surrounding financial planning (and its related products) are geared towards servicing those clients with financial products already in place. Tax deductions are available for expenditure which is incurred in relation to the management of income-producing investments, but not for the initial creation of an investment strategy.

‘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,’ the IPA said in its submission.

… the absence of a tax deduction for these fees discourages many Australians from pursuing important strategic advice

The member association also noted that the Future of Financial Advice (FoFA) reforms will lead to more advisers moving to a fee for service model, and that the imposition of a fee which is not tied to performance (ie: a commission) could lead to a reduction in the number of customers seeking the assistance of a qualified adviser.

“Australia’s tax system is cumbersome and complex and needs to be simplified. The current system will struggle to achieve adequate revenue as we face an ageing population,” said IPA CEO, Andrew Conway.

The IPA argued that allowing initial financial advice fees to be tax deductible would ‘considerably assist consumer access to affordable financial advice’.

‘Tax deductibility carries a cost which will be significantly outweighed by the longer-term benefits of the assistance provided to taxpayers as they plan for independent retirement as well as improving financial literacy,’ the Association said.