ATO consultation on tax deductibility of financial advice fees welcome: FPA

The Financial Planning Association of Australia (FPA) says yesterday’s decision by the Australian Taxation Office (ATO) to update its guidance on the tax deductibility of financial advice fees is very welcome.

The ATO’s move comes after two years of advocacy and engagement by the FPA, in conjunction with Tangelo Advice Consulting.

FPA CEO, Sarah Abood, says the ATO’s consultation process could be a gamechanger.

“The FPA has long been advocating for broad tax deductibility of both initial and ongoing financial advice fees. One of the quickest and easiest ways to make quality financial advice more affordable for consumers, would be to make it tax-deductible in full.

“While we continue to advocate strongly for this outcome with government, we’ve also been calling out concerns with the ATO’s current guidance on deductibility of advice. Tax Determination 95/60 considers an upfront fee paid for an investment plan in 1995. IT39 reflects an ongoing fee paid on an investment portfolio in 1980. Much has changed in our profession since then, and we believe it’s critical that the guidance be updated to consider the personal advice, subject to the best interest duty, that’s delivered by professional financial planners today.

“The ATO’s commitment to issue a new Tax Determination – indicating its willingness to modernise its long-standing view on this important issue – will provide more certainty to our members and the broader community of Australians who benefit from comprehensive financial advice.

“There are two critical areas of the current Tax Determination we’re keen to see reviewed. The first relates to the timing of advice. The current view is that financial planning advice happens ‘too early in time’ to be considered part of the income-producing process. However in our view, it’s the character of advice that should determine its tax treatment, rather than purely the timing of the fee paid.

“Secondly, there is currently no ATO view on the tax treatment of tax (financial) advice – which in our view should be fully deductible as a cost of managing tax affairs.

“The FPA will continue to work closely with the ATO, and wider profession, to help ensure that tax deductibility of financial advice fees become a reality in all stages of the financial advice process,” Ms Abood says.

More information regarding the ATO’s consultation can be found here on the ATO’s Advice under development website.

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