Conrad Travers (left) and Sarah Abood

After industry campaigning, the tax office is developing guidance on the tax deductibility of advice fees.

The move was welcomed by the Financial Planning Association which has long campaigned for expanding tax deductions for financial advice fees and Tangelo Advice Consulting who have been working closely on behalf of the FPA for the last two and half years on this project.

Tangelo Advice Consulting principal consultant Conrad Travers tells Professional Planner it’s fantastic news the ATO is conducting the review.

“The guidance (TD 95/60) is in our view outdated and doesn’t represent the myriad of regulatory reform that has occurred since 1995.”

The draft determination will set out the tax commissioner’s preliminary view on the deductibility of financial advice fees under sections 8-1 (deductions) or 25-5 (deductions for tax related expenses) of the Income Tax Assessment Act 1997 for individuals who are not carrying on a business.

“We believe there is a strong case under both 8-1 and 25-5 for all financial planning fees to be deductible,” Travers says.

“We believe that in our current environment, around 75 per cent of the strategies an adviser recommends have a tax component to them.”

Travers says the firm looks forward to a potential win for advisers and their clients.

“We are hopeful the ATO review results in a significant change, and an outcome that encourages all Australians to receive financial advice.”

Up for review

FPA chief executive Sarah Abood said the ATO’s consultation process could be a “gamechanger”.

“The FPA has long been advocating for broad tax deductibility of both initial and ongoing financial advice fees,” Abood said in a media release on Thursday.

“One of the quickest and easiest ways to make quality financial advice more affordable for consumers, would be to make it tax-deductible in full.”

However, Abood said there are two critical areas of the current Tax Determination that should be reviewed which relate to the timing of advice and tax (financial) advice.