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The Financial Advice Association of Australia (FAAA) says the Australian Taxation Office (ATO)’s release of the final determination regarding the tax deductibility of advice fees (TD 2024/7) is a welcome conclusion to the matter, which commenced in early 2019. Over the last five years, the FAAA has led advocacy on behalf of its members to update the outdated ATO view in TD 95/60.
During this time, the FAAA has continued to work with the ATO including coordinating an industry submission providing feedback on the draft tax determination TD 2023/D4. This feedback was considered by the ATO in finalising its view.
The ATO’s view in the final determination confirms its updated view from the draft determination that financial advice fees relating to tax (financial) advice can be deductible under section 25-5 (which deals with tax related expenses) if the advice is provided by a Qualified Tax Relevant Provider (QTRP). The ATO has maintained its view that other fees relating to initial advice are capital in nature and thus not deductible, and that ongoing financial advice fees are deductible.
FAAA CEO, Sarah Abood, says that FAAA will now be working on providing members with guidance on how to implement this tax determination.
“We want to thank the ATO for bringing this matter to a conclusion.
“The confirmation that initial advice related to tax is deductible, when provided by a QTRP, is a big improvement over the original TD, which did not support deductions for upfront advice to any extent.
“In our most recent consultations, we asked the ATO to reconsider the deductibility of upfront fees under section 8-1 for other types of advice as well, particularly for clients with pre-existing investments. The ATO has not agreed to this. However we are very happy after five years to now have clarity with the final TD 2024/7.
“With the added clarity surrounding deductions under section 25-5, we believe a significant portion of a typical advice fee will be deductible for the clients of many advisers and practices. Increased deductibility of advice fees should help make advice more affordable for many Australians.
“We can now start the process of developing clear guidance for our members on the ATO’s view and how to engage with their clients and accountants on this,” Ms Abood says.
The FAAA will provide guidance to support the ATO’s revised guidance with explanation, interpretation and practical support in early 2025.
