The FPA believes any fresh surge in demand for advice created by making it tax deductible will need to be met by new practices, rather than experienced planners.
As the key lobbyist behind the push to make financial advice tax deductible, the FPA was working with Conrad Travers of Tangelo Consulting and James Alsop of Deloitte Legal on the ATO’s review and update of TD95/60.
While their work to date had focused on updating the ATO ruling, many financial advisers had been left wondering if tax-deductible advice would address deeper issues that continued to plague the profession.
Commenting on a recent LinkedIn post, veteran financial planner and managing director of Generational, Lance Meikle, said making advice tax deductible could increase the workload for wealth professionals.
“Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income,” he wrote.
“Good luck in trying to navigate the already-broken relationship between accountants and financial planners when it comes to working out the pro-rata percentage of this section to enable the accountant to apply for a deduction. The concept can (and will) only add to the workload (and therefore cost) of both the financial planner and accountant.”
However, the FPA was confident updating the tax ruling would help change how financial advice was perceived.
Speaking to Money Management, FPA CEO Sarah Abood said updating and clarifying the current tax guidance would better reflect a modern interpretation of financial advice, which she said has undergone significant regulatory change since 1995.
“Financial advice is a profession where all advisers have been through education standards, Code of Ethics training as well as specific tax (financial) advice training and because of this we think the TD needs to better reflects the industry as a true profession,” Abood said.
“If the government were to make financial advice subject to its own specific tax deduction, we would expect many Australians who had not previously sought advice, or had found the cost of advice prohibitive, would seek to engage or re-engage with financial advisers to assist in reaching their financial objectives and goals.”
However, the FPA boss accepted that not all advice professionals would be in a position to meet the increased demand.
“There’s no doubt that some advisers – particularly those with more mature practices – have slowed down or stopped taking on new clients, while some have increased the fee levels at which they will engage a new client, in response to the increasing costs to advise clients,” Abood said.
However, she remained confident that other practices, such as those bringing in newer planners, were taking on new clients and creating capacity within their businesses through new technology and other methods to engage new clients.
“There is already a supply and demand imbalance in financial advice, that is managed via licensee standards, training, technology and controls like paraplanning, audit and the wider supervision and monitoring controls that already occur in the industry,” Abood said.
“We are working hard with the government and regulators on reducing the costs involved in unnecessary red tape, duplicative and conflicting regulations and reporting requirements – these are major contributors to increased costs in our profession.”
The FPA also believes the Quality of Advice (QOA) review would help reduce the cost of producing advice as well as consuming it.
Abood said the efficiency aspect of providing cheaper ways to provide advice had long been an issue in the industry, but recent enhancements and providers were already focussed on this.
“The QOA review changes themselves have the potential to drive significant productivity enhancements,” she said.
Making advice tax deductible won’t make any difference at all to my business. But agree Advice fees should be a tax deduction…..it’s just won’t make a difference.
New planners, FPA. Really? Where are they going to come from?
We can easily take on more clients….provided the ridiculous prescriptive and expensive compliance requirements are materially reduced.
Many individual Australians would benefit greatly from good financial advice, the country would benefit through lower aged care/pension costs.
The only losers would be the tin gods that have to fall in ASIC and Treasury. A win all round in my books.
I applaud making advice tax deductible, but surely when that happens, advisers can have access to client’s ATO portals. The amount of work we could reduce for the ATO would be enormous if advisers could look up a client’s concessional contributions, taxable income, etc. without having to ask the client to use my.gov.au all the time (challenging for over 70 years old clients) or the tax agent (good luck with that). Please let’s have more common sense and less paperwork.