Accountants back advisers on tax deductibility of advice
The major accounting bodies have moved into line with the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) in calling for the full tax deductibility of financial advice.
CPA Australia has used its pre-Budget submission to the Treasury to call on the Government to legislate to make financial advice frees tax deductible while noting that the issue had also been traversed by Treasury’s Intergenerational Report.
The CPA Australia submission aligned with that of the FPA which points to the Australian Taxation Office (ATO) having committed to looking at the tax deductibility of advice and has urged the Government to “proactively provide surety to the sector” by including an appropriate offset in the Budget.
“This current tax treatment results in the benefits of available deductions for ongoing financial advice being skewed towards those of higher net wealth and incomes, and who can already afford financial advice for their established investment portfolios. Increasing the accessibility and affordability of financial advice for all Australians, particularly for those on lower incomes, will provide for a more financially competent community, with Australians becoming more financially literate and better able to support themselves, especially during retirement,” the FPA said.
The FPA has also called for a rethink of the funding of the Compensation Scheme of Last Resort (CSLR) to reflect the jurisdiction of the Australian Financial Complaints Authority (AFCA).
The CPA Australia submission bluntly states that “seeking advice is expensive and the ability to fully deduct the cost of advice upfront rather than capitalising the expense will help Australians plan for their future”.
It recommended that a specific provision for the deductibility of financial advice fees, “like the deduction of tax-related expenses (section 25-5 of the Income Tax Assessment Act 1997) should be introduced.
The submission canvassed the tax deductibility of advice in the context of the objective of superannuation, claiming that there are opportunities in the upcoming Budget for “targeted improvements to Australia’s retirement to support the comm the community and the economy in coming years”.
It also recommended that payment of superannuation guarantee contributions on paid parental leave stating “the gender gap in retirement savings means that women retire with smaller superannuation balances than men, which in turn means less financial security. Mothers are overwhelmingly more likely than fathers to take time off to care for children.”
“The Retirement Income Review investigated paying superannuation on parental leave and found it would help reduce the gap. The Productivity Commission also recommended paying super on parental leave,” it said.
On the question of retirement savings reform, the submission reinforced the need for the purpose of superannuation to be clarified and clearly stated.
In addition to superannuation, the retirement savings system also encompasses the Age Pension, non-superannuation investments including the family home, and aged care.
A clearly articulated objective for superannuation and the retirement savings system more broadly will aid in more careful consideration of future policy settings. This includes the taxation of superannuation, the concessions provided to encourage superannuation savings and early access to superannuation.
Our view is that the time is right to ensure that the sole purpose of superannuation – to provide benefits to members in retirement – is reaffirmed to minimise leakage from superannuation unrelated to retirement and to provide certainty regarding the use use of retirement savings held in superannuation. This will help ensure that Australians enjoy the standard of retirement for which they had planned.
Further, issues regarding equity, concessions and taxation cannot be made in isolation and should form part of the broader discussion around reform of the Australian taxation system.
The Government promised to make advice affordable and accessible to Australians at the time of the GFC. (Bernie Rippol).
If they were serious, then the first thing they should have done was to make financial advice tax-deductible.
Well, they didn’t, and every other move the Government has made seems to only make it more expensive…