ATO session on tax deductibility of monetary recommendation charges welcome: FPA

The Monetary Planning Affiliation of Australia (FPA) says yesterday’s determination by the Australian Taxation Workplace (ATO) to replace its steerage on the tax deductibility of monetary recommendation charges could 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 could possibly 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 inexpensive for shoppers, can be to make it tax-deductible in full.

“Whereas we proceed to advocate strongly for this final result with authorities, we’ve additionally been calling out issues 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 consider it’s essential that the steerage be up to date to think about the non-public recommendation, topic to one of the best curiosity obligation, that’s delivered by skilled monetary planners immediately.

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

“There are two essential 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 of a part of the income-producing course of. Nevertheless in our view, it’s the character of recommendation that ought to decide its tax therapy, fairly than purely the timing of the charge paid.

“Secondly, there may be presently no ATO view on the tax therapy of tax (monetary) recommendation – which in our view must be absolutely deductible as a price of managing tax affairs.

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

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