Allowing Australians to claim a tax deduction on financial advice will ensure better retirement outcomes and keep advice accessible and affordable, according to the
The Institute believes there is a strong case to support the tax deductibility for the costs associated with financial planning advice.
"We understand the tight fiscal environment so a capped limit on deductions would be a positive step forward for more Australians to access financial advice," said IPA chief executive officer,
Currently, a fee for service arrangement for the preparation of an initial financial plan is not tax deductible as it is not considered to be an expense incurred in producing assessable income. Recent changes to acceptable remuneration arrangements for the financial advice sector as part of the FOFA reforms will see advisers move from a commission based to a fee for service remuneration regime.
When advisors were paid via commissions these costs were deductible as they were paid by the product provider. Under the new remuneration model, end users must pay advisors directly so the government will be better off financially under the new arrangements if it continues to disallow certain costs associated with the provision of financial advice.
Hence, the cost to Government will not be significant (if at all) as these costs where previously fully deductible as commissions when paid to the financial planner.
"The tax deductibility of financial advice would considerably increase financial literacy, boost affordability and accessibility and reduce demands on public funding. It would encourage a larger numbers of Australians to seek financial advice.
"The costs of a capped tax deductibility limit for financial planning advice will be significantly outweighed by the longer term benefits of assistance provided to tax payers as they plan for independent retirement.
"IPA members are well positioned to assist Australians to organise their finances and plan for retirement by providing independent and non-product specific advice. Already more than 70 per cent of Australians seek the services of a tax agent," said
The IPA has made this recommendation in its pre-Budget submission 2014-15.
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