Tax deductions for advice fees flagged

The Parliamentary Joint Committee investigating the financial service industry has pointed to the potential benefits that could be created by making payments for fee-for-service financial advice tax deductible.

The committee, led by Bernie Ripoll, has recommended the Government consider the implications of making financial advice tax deductible as part of its response to Treasury’s review of the tax system, led by Ken Henry.

The committee’s report said the “proposal to make the cost of financial advice tax deductible for consumers has merit”.

“It could potentially encourage more people to seek financial advice and would match the deductibility presently afforded to manufacturers paying commissions to advisory firms,” the report states.

But the committee also said tax deductions could “represent a subsidy for financial advisers, with the market willing to bear higher costs knowing that a proportion will be returned at the end of the financial year”.

The report handed down by the committee said there was “considerable support” for the proposal, with various groups saying tax deductions would make this form of remuneration more affordable, among other benefits.

Groups including the Institute of Chartered Accountants and Boutique Financial Planning Principals Group said this would create consistency and equity across the advice playing field, while groups including AXA, MLC, consumer body Choice and the Industry Super Network also lobbied for tax deductions for advice costs.