The FAAA believes a “significant portion” of a typical advice fee will be tax deductible for the clients of many advisers and practices, following the Australian Taxation Office’s release of its final determination regarding the tax deductibility of advice fees.
The association says in a statement that the ATO release of the final determination regarding the tax deductibility of advice fees (TD 2024/7) is a welcome conclusion to the matter, which commenced in early 2019, noting that it has led advocacy on behalf of its members to update the outdated ATO view in TD 95/60.
The FAAA says that during this time, it has continued to work with the ATO including coordinating an industry submission providing feedback on the draft tax determination. This feedback was considered by the ATO in finalising its view.
“The ATO’s view in the final determination confirms its updated view from the draft determination that financial advice fees relating to tax (financial) advice can be deductible under section 25-5 (which deals with tax related expenses) if the advice is provided by a Qualified Tax Relevant Provider,” it says.
“The ATO has maintained its view that other fees relating to initial advice are capital in nature and thus not deductible, and that ongoing financial advice fees are deductible.”
FAAA CEO, Sarah Abood, says that FAAA will now be working on providing members with guidance on how to implement this tax determination and she thanked the ATO for bringing the matter to a conclusion.
“The confirmation that initial advice related to tax is deductible, when provided by a QTRP, is a big improvement over the original TD, which did not support deductions for upfront advice to any extent.
“In our most recent consultations, we asked the ATO to reconsider the deductibility of upfront fees under section 8-1 for other types of advice as well, particularly for clients with pre-existing investments. The ATO has not agreed to this. However we are very happy after five years to now have clarity with the final TD 2024/7.”
…Increased deductibility of advice fees should help make advice more affordable for many Australians…
It notes that with the added clarity surrounding deductions under section 25-5 “…we believe a significant portion of a typical advice fee will be deductible for the clients of many advisers and practices. Increased deductibility of advice fees should help make advice more affordable for many Australians.”
The following is an example from the ATO determination regarding advice in relation to insurance policies. Click here to read the full determination.
