All financial advice should be tax-deductible to improve the advice gap, according to the Financial Planning Association of Australia’s (FPA) submission to the Quality of Advice review.
In its submission, it said the regulatory system needed to be flexible to stimulate competition and ensure all registered relevant providers had the ability to provide limited scope advice, regardless of the business model they operated under, for the benefit of consumers.
Tax deductibility of initial advice fees would offset and clarity around the tax status of ongoing advice fees would offset a proportion of the price differential between registered relevant providers and non-relevant providers and unregulated advice, according to the FPA.
Currently, tax status was based on a 25-year old determination where ongoing fees were tax deductible but the fee for a preparation of an initial financial plan was not.
The FPA said: “All financial advice should have tax deductible status to help make financial advice accessible and affordable for all Australians. This should be regardless of the stage in the financial advice process it is provided, and whether it directly relates to the creation of investment income.
“Treating the creation of an initial financial plan in a different fashion to that of ongoing advice provides a disincentive for Australians to seek ‘episodic’ financial advice which will assist them to actively plan, save and secure their financial future. It also acts as a further barrier for Australians who have not previously sought or received financial advice.”
Increasing the accessibility and affordability of financial advice would help Australians to become more financially literate, especially for those in retirement, it said.
