Almost a year after the Australian Taxation Office launched consultation, the advice profession should soon find out if further advice services will be tax deductible, according to the Financial Advice Association.
The FAAA precursor – the Financial Planning Association – had been working with Tangelo Consulting since last year on campaigning to have the tax code updated, believing that current legal guidance suggested there was an argument all advice fees could be deducted.
While some advice fees currently are deductible, the fee to create a financial plan isn’t.
Speaking at the FAAA Congress in Adelaide, CEO Sarah Abood said the next step – which will be to issue the next draft of the updated tax determination for public consultation – is expected “any day now”.
“It says November on the ATO page, so hopefully we’ll be able to let you know where that’s at any day now,” Abood said.
The association has suggested it’s important to consider the deductibility of tax financial advice which is not mentioned all in the current determination. “This has been a long process,” Abood said.
Abood said it hasn’t been easy to convince the government to add another tax deduction. “Doesn’t mean we’re gonna stop trying,” Abood said.
“We’re also pursuing another strategy and that’s been the case since August 2020. We’ve been working directly with the ATO to update the relevant tax determination, TD [tax determination] 95/60. It’s almost 30 years old now and it’s well and truly due for an update.”
Since then, Abood said the association has been engaged with all the accounting associations in private consultation with the ATO.
“We’ve asked them to consider that it is the character of the financial planning process and advice that should determine the tax treatment, not the point in time at which it occurs,” Abood said.
The current tax ruling on advice fees was first written in 1995 and was last updated in 2012 and much of the guidance references laws several decades old.
When consultation opened in December last year Abood said TD 95/60 “considers an upfront fee paid for an investment plan in 1995. [Taxation ruling ] IT39 reflects an ongoing fee paid on an investment portfolio in 1980”.
“Much has changed in our profession since then, and we believe it’s critical that the guidance be updated to consider the personal advice, subject to the best interest duty, that’s delivered by professional financial planners today,” Abood said.
She added the ATO’s commitment to issuing a modernised tax determination will provide more certainty to the association’s members and to Australians who seek advice.