Accountants call for tax deductible advice
The Institute of Chartered Accountants (ICAA) has called on the Federal Government to make some financial planning fees tax deductible and to address superannuation and business tax reform issues in its 2006-07 pre-budget submission.
“It’s time for a review of tax deductibility and part of that would be the costs associated with implementing and developing a financial plan,” said ICAA manager, financial planning and super, Hugh Elvy.
“In the last two years we’ve seen the introduction of Financial Services Reform, choice of funds legislation, the development of a taskforce to investigate how to encourage people under 40 to contribute to super and the financial literacy taskforce — so things have actually changed quite considerably.
Apart from encouraging more to seek financial advice, Elvy said tax deductibility would help the financial planning industry evolve towards a more mature mode of adviser remuneration.
“If people are going to pay fee-for-service, one of the things which will encourage them to do that will be tax deductibility.”
Under current legislation trail commission paid to planners is tax deductible but up-front plan fees are not.
The ICAA’s calls for tax deductibility echo those of the Financial Planning Association, who made similar requests to the Government in October this year.
The ICAA has also called for rules on tax deductions applying to superannuation contributions made by self-employed people to be brought into line with those made by employers on behalf of their staff.
Currently, self-employed people can claim a tax deduction for super contributions up to $5,000, plus 75 per cent of the amount over $5,000, subject to age based limits. In contrast, contributions made by employers for employed individuals including salary-sacrificed amounts receive a full tax deduction up to the age based limits.
The ICAA claims this represents an unfair difference and discourages self-employed people from contributing more than $5,000 each tax year.
The ICAA further hit out at the fact that the co-contribution scheme for employees on incomes up to $58,000 who made after tax member contributions to superannuation was not available to self-employed people, regardless of their income.
It claims removing this discrepancy would encourage greater savings and result in a simpler, more uniform system.
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