The Institute of Public Accountants (IPA) has called on the Government to make client fees for initial financial plans tax deductible. The institute says the move would be keeping in line with FoFA intentions of boosting access and affordability of financial advice.
“Allowing initial fees to be tax deductible would considerably assist consumer access to affordable financial advice. As it stands, the absence of a tax deduction for these fees discourages many,” the IPA said in the submission.
IPA senior tax adviser Tony Greco says clients probably aren’t aware that the fees they will have to pay will be non-deductible. “No one’s telling the public that that’s the likely scenario – if it’s a new investment or a plan that leads to no purchase of financial products then they’re probably going to wear [those costs]. It’s something that’s going to rear its ugly head come 1st July when they get bills for the services of the financial planner.”
He says most clients will be expecting some sort of tax relief from the upfront fees, and many will be turned off advice when they learn that some, if not all, of the advice is non-deductible. It isn’t the problem of the financial planner to tell them, and they probably don’t want to for fear of scaring away clients, says Greco. The client will take their financial advice bill to the accountant, and the accountant will be the bearer of bad news.
He says the Government could address the problem by making the fees tax deductible, without any extra cost. “The thing is, the costs have already been buried. Because it’s coming in via commissions, which are deductible, it’s not going to be a huge cost to Government unless more people visit a financial planner.”
The Government have acknowledged that there is merit in the idea, but Greco says that due to fiscal restraints they will probably want to cap it. “In this climate there’s got to be some upper limit to what can be claimed.
“Given that FoFA is all about making financial advice more accessible and more affordable, the missing link now is getting some tax deduction.”
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