Tax deductibility of advice high on agenda

Two key financial services groups have thrust tax concessions for financial advice squarely onto the agenda of the Parliamentary Joint Committee on Corporations and Financial Services.

Both the Investment and Financial Services Association (IFSA) and the Institute of Chartered Accountants in Australia (ICAA) pushed for concessionary tax treatment of fee-for-service financial advice in appearances before the committee late last week.

The chief executive of the ICAA, Graham Meyer, claimed existing arrangements under which commissions-based advice received a tax concession while fee-for-service arrangements did not represented a distortion.

“Allowing deductibility of fee-for-service advice is a necessary step for securing greater trust between financial advisers and their clients,” he said. “This contributes to the professionalism of the industry.”

IFSA’s newly appointed chief executive John Brogden said that providing tax deductibility for all financial advice was essential to ensuring that investors were able to effectively exercise choice in how they paid for their advice, irrespective of whether it was upfront or ongoing.

IFSA also used its opening address to the inquiry to call for the Australian Securities and Investments Commission (ASIC) to be better prepared in responding pre-emptively to market misconduct.

“Industry has an important role to play in this area by alerting and assisting the regulator to what is happening in the marketplace,” Brogden told the inquiry.

“A stronger feedback loop between the industry and the regulators will have the potential to improve the operation of the financial services system for the benefit of all stakeholders.”