FPA requests update on tax status of advisory fees
All financial advice should be tax deductible to reduce the advice gap, according to the Financial Planning Association of Australia’s (FPA) submission to the quality of advice review.
In his brief, he said the regulatory system needed to be flexible to stimulate competition and to ensure that all registered affected providers had the ability to provide limited scope advice, regardless of the business model in which they operated, at the benefit of consumers.
Tax deductibility of upfront advisory fees would offset and clarity of the tax status of ongoing advisory fees would offset some of the price differential between relevant registered providers and irrelevant providers and unregulated advice, according to the FPA.
Currently, the tax status was based on a 25-year-old ruling that ongoing expenses were tax deductible, but expenses for preparing an initial financial plan were not.
The FPA said: “All financial advice should have tax-deductible status to help make financial advice accessible and affordable for all Australians. This should be done regardless of the stage of the financial advice process provided and whether it is directly related to the generation of investment income.
“Treating the creation of an initial financial plan in a different way than ongoing advice deters Australians from seeking ‘episodic’ financial advice that will help them actively plan, save and secure their financial future. It also poses an additional hurdle for Australians who have never sought or received financial advice before.
Increasing the accessibility and affordability of financial advice would help Australians become more financially savvy, especially for retirees, he said.