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

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 could be very welcome.

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

FPA CEO, Sarah Abood, says the ATO’s session course of might 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 end 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 payment paid for an funding plan in 1995. IT39 displays an ongoing payment paid on an funding portfolio in 1980. A lot has modified in our occupation since then, and we imagine it’s crucial that the steerage be up to date to contemplate the non-public recommendation, topic to the very best curiosity responsibility, that’s delivered by skilled monetary planners as we speak.

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

“There are two crucial 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. Nevertheless in our view, it’s the character of recommendation that ought to decide its tax remedy, somewhat than purely the timing of the payment paid.

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

“The FPA will proceed to work carefully with the ATO, and wider occupation, to assist be certain that tax deductibility of monetary recommendation charges turn into a actuality in all phases of the monetary recommendation course of,” Ms Abood says.

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