The decision by the Australian Taxation Office to update its guidance on the tax deductibility of financial advice fees “could be a gamechanger” according to FPA CEO Sarah Abood.
In welcoming the ATO’s consultation process, she says the FPA has long been advocating for broad tax deductibility of both initial and ongoing financial advice fees.
“One of the quickest and easiest ways to make quality financial advice more affordable for consumers, would be to make it tax-deductible in full.”
Abood says that while the FPA continues to advocate strongly for this outcome with government “…we’ve also been calling out concerns with the ATO’s current guidance on deductibility of advice.”
…Tax Determination 95/60 considers an upfront fee paid for an investment plan in 1995…
“Tax Determination 95/60 considers an upfront fee paid for an investment plan in 1995. IT39 reflects an ongoing fee paid on an investment portfolio in 1980.”
She says much has changed in the profession since then “…and we believe it’s critical that the guidance be updated to consider the personal advice, subject to the best interest duty, that’s delivered by professional financial planners today.”
“The ATO’s commitment to issue a new Tax Determination – indicating its willingness to modernise its long-standing view on this important issue – will provide more certainty to our members and the broader community of Australians who benefit from comprehensive financial advice.”
Two critical areas
Abood says there are two critical areas of the current Tax Determination it’s keen to see reviewed:
- The first relates to the timing of advice. The current view is that financial planning advice happens ‘too early in time’ to be considered part of the income-producing process. “However in our view, it’s the character of advice that should determine its tax treatment, rather than purely the timing of the fee paid.”
- Secondly, there is currently no ATO view on the tax treatment of tax (financial) advice – “…which in our view should be fully deductible as a cost of managing tax affairs.”
She says the FPA will continue to work closely with the ATO, and wider profession “…to help ensure that tax deductibility of financial advice fees become a reality in all stages of the financial advice process.”
The association notes the ATO’s move comes after two years of advocacy and engagement by the FPA, in conjunction with Tangelo Advice Consulting.
Click here for more information regarding the ATO’s consultation.
