Tax deductible advice to help with better retirement outcomes
The Government’s Intergenerational Report (IGR) indicates the need for better retirement planning and therefore, appropriate financial advice is essential, says the Institute of Public Accountants (IPA).
“The Intergenerational Report concludes that there will only be 2.7 working Australians to support every Australian over the age of 65 by 2055. Competent and affordable financial advice will be an essential ingredient in paving the way to sustainable retirement incomes and to help alleviate over-reliance on government funded pensions," said IPA chief executive officer, Andrew Conway.
“Allowing Australians to claim a tax deduction on financial advice will ensure better retirement outcomes and keep advice accessible and affordable.
“The IPA believes there is a strong case to support the tax deductibility of all of the costs of financial planning advice.
“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.
“Changes to conflicted remuneration arrangements and the introduction of the best interests duty for the financial advice sector as part of the Future of Financial Advice reforms strengthen the case for the provision of deductible financial advice.
“The cost to Government will not be significant as these costs were 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,” said Mr Conway.
The IPA has made this recommendation in its pre-Budget submission 2015-16. Further detail can be found at www.publicaccountants.org.au/2015budget