September 29, 2023

The Monetary Planning Affiliation of Australia (FPA) says yesterday’s resolution by the Australian Taxation Workplace (ATO) to replace its steerage on the tax deductibility of monetary recommendation charges may be very welcome.

The ATO’s transfer comes after two years of advocacy and engagement by the FPA, at the side of Tangelo Recommendation Consulting.

FPA CEO, Sarah Abood, says the ATO’s session course of may very well be a gamechanger.

“The FPA has lengthy been advocating for broad tax deductibility of each preliminary and ongoing monetary recommendation charges. One of many quickest and best methods to make high quality monetary recommendation extra reasonably priced for shoppers, can be to make it tax-deductible in full.

“Whereas we proceed to advocate strongly for this consequence with authorities, we’ve additionally been calling out considerations with the ATO’s present steerage on deductibility of recommendation. Tax Willpower 95/60 considers an upfront charge paid for an funding plan in 1995. IT39 displays an ongoing charge paid on an funding portfolio in 1980. A lot has modified in our career since then, and we imagine it’s important that the steerage be up to date to think about the private recommendation, topic to the perfect curiosity obligation, that’s delivered by skilled monetary planners at this time.

“The ATO’s dedication to challenge a brand new Tax Willpower – indicating its willingness to modernise its long-standing view on this vital challenge – will present extra certainty to our members and the broader group of Australians who profit from complete monetary recommendation.

“There are two important areas of the present Tax Willpower we’re eager to see reviewed. The primary pertains to the timing of recommendation. The present view is that monetary planning recommendation occurs ‘too early in time’ to be thought-about a part of the income-producing course of. Nonetheless in our view, it’s the character of recommendation that ought to decide its tax remedy, moderately than purely the timing of the charge paid.

“Secondly, there may be at the moment no ATO view on the tax remedy of tax (monetary) recommendation – which in our view needs to be totally deductible as a value of managing tax affairs.

“The FPA will proceed to work intently with the ATO, and wider career, to assist make sure that tax deductibility of monetary recommendation charges grow to be a actuality in all phases of the monetary recommendation course of,” Ms Abood says.

Extra data relating to the ATO’s session may be discovered here on the ATO’s Recommendation underneath improvement web site.