Tax deductible advice, invest in infrastructure

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The Financial Planning Association is worried the people who need advice most are not able to afford it, asking the government to make financial planning advice tax-deductible and allow alternative payment methods.

The FPA recommended in a submission on the Federal Budget that the preparation of an initial financial plan and ongoing management fees or annual retainer fees be expressly stated as tax deductible.

“Including financial planners in the Tax Agent Services regime and banning commissions on financial advice set the right environment to introduce tax deductibility of financial advice fees,” FPA said.

“The inability to claim a tax deduction for the fees associated with an initial financial plan acts as a disincentive for people to take the first step towards organising their finances on a strategic basis...

“Specifically allowing initial advice fees to be tax deductible would greatly assist consumers’ access to affordable financial advice that is beyond mere income tax or of a superannuation nature.

"While this would involve some additional costs to government, these costs would be significantly outweighed by the long-term benefits. Including caps on either the size of the tax deduction or an income cap on those able to receive a deduction could control this revenue cost.”

FPA has also recommended extending the sole purpose test in the Superannuation Industry (Supervision) Act or including a specific trustee authority – its preferred option – to let consumers deduct advice fees from their superannuation account for personal financial advice on retirement savings.

“A consumer should be allowed to use their superannuation account balance to pay for advice from any qualified financial planner, as long as the advice supports building of retirement savings. Advice fees should be transparently disclosed and clearly separated from fund management fees.”

FPA also said salary sacrifice arrangements should contribute towards adviser fees, and the government’s superannuation co-contribution scheme should be restarted to help low income earners access financial advice.
The government should take heed of its submission, FPA hopes, to encourage a savings culture to reduce reliance on the social security system, improve access to financial advice for Australians who most need it, and remove inconsistencies in the tax system.

The Association of Superannuation Funds of Australia also made a submission, recommending the key focus of this year’s budget should be to remove any impediments which stall superannuation fund investment in infrastructure assets.

The most important way to help super fund investment in infrastructure is to develop a “pipeline” of investable projects, ASFA CEO Pauline Vamos said.

"This would give super funds and other long-term investors the confidence to develop infrastructure bidding teams."

According to ASFA, bidding costs is another area where significant improvement is needed to help match superannuation savings to infrastructure projects.

“At present, the bid costs in Australia are among the highest in the world. Streamlining bid processes would help drive these costs down, creating a more favourable environment for super funds to invest,” said Vamos.

"What we do support is the removal of red-tape processes that add cost and complexity to infrastructure financing arrangements.”