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New ATO guidance on tax deductibility of financial advice fees released

The Financial Advice Association of Australia (FAAA) says the Australian Taxation Office’s (ATO) new draft determination (TD 2023/D4) is a welcome development in clarifying the rules around deductibility of financial advice fees.

The FAAA has worked closely with Tangelo Advice Consulting and industry bodies in consultation with the ATO regarding updating Tax Determination 95/60.

Sarah Abood, CEO of the FAAA, says the FAAA is broadly pleased with the revised guidance, and will provide further feedback as part of the public consultation process.

“This revised guidance is sensible and welcome. The existing Tax Determination is almost 30 years old, and a substantial amount of regulatory change has occurred since 1995. In addition, financial advisers are now recognised as Qualified Tax Relevant Providers (QTRPs), and are regularly providing tax advice to clients.

“This draft revised guidance clearly states that upfront fees are deductible to the extent that they relate to tax advice, and there is far greater clarity on the deductibility of ongoing fees.

“It’s pleasing to see that the ATO has included some real-world examples, including ones that we had suggested,” Ms Abood says.

The revised guidance is open to feedback until 2 February 2024, and the FAAA encourages all industry participants to consider making a submission.

Once the ATO issues a final tax determination, the FAAA will provide guidance to support members in applying the guidance with explanatory materials and practical support, including tools and templates.

The Draft Taxation Determination is available here.

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