Accountants throw weight behind tax deductability of advice
The Institute of Public Accountants (IPA) has thrown its weight behind calls for making financial advice tax deductible.
With the Financial Planning Association (FPA) having once again included tax deductibility in its pre-Budget submission, the IPA has made a similar plea to the Government with its chief executive, Andrew Conway, saying it would help ensure better retirement outcomes and keep advice accessible and affordable.
“We understand the tight fiscal environment so a capped limit on deductions would be a positive step forward for more Australians to access financial advice,” Conway said.
The IPA pointed out that, under current arrangements, a fee for service arrangement for the preparation of an initial financial plan is not tax deductible as it is not considered to be an expense incurred in producing assessable income.
However it said that recent changes to acceptable remuneration arrangements for the financial advice sector as part of the Future of Financial Advice (FOFA) changes would see advisers move from a commission-based to a fee for service remuneration regime.
It said that when advisers were paid via commissions the costs were deductible as they were paid by the product provider. Under the new remuneration model, end users had to pay advisers directly so the Government would be better off financially under the new arrangements if it continued to disallow certain costs associated with the provision of financial advice.
“Hence, the cost to Government will not be significant (if at all) as these costs where previously fully deductible as commissions when paid to the financial planner,” Conway said.
“The tax deductibility of financial advice would considerably increase financial literacy, boost affordability and accessibility and reduce demands on public funding,” he said. “It would encourage a larger numbers of Australians to seek financial advice.
“The costs of a capped tax deductibility limit for financial planning advice will be significantly outweighed by the longer-term benefits of assistance provided to tax payers as they plan for independent retirement,” Conway said.
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