All financial advice should be tax deductible

It doesn’t make sense that those starting out in the investment game miss out on tax breaks for financial advice fees.

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Let’s make financial advice tax deductible ... No doubt, most people would be of the opinion it is already.

Not quite.

If you are up and running with an investment portfolio and you get professional advice the fees are tax deductible.

Ironically, if you are starting out in the investment game and seeking a beginner’s Statement of Advice to create a financial plan then the bill is not tax deductible.

Now the Financial Planning Association of Australia has picked up the issue and is pressing the government to request a review of the situation from the Productivity Commission.

“We’re asking for a Productivity Commission review because they are a completely independent body, we could do it ourselves but that would not have the same impact’, says Dante De Gori, the CEO of the FPA.

The reason first timers in the financial planning arena get no tax deduction is based on a common principle in financial law that operational expenses are tax deductible but not establishment expenses: If you spend money in the search for an investment apartment those expenses are not tax deductible, if you spend money maintaining that apartment once you have made the purchase they are.

The issue has been a thorn in the side for financial planners for years. However, it has become central in recent times as the substantial red tape around initial statements of advice means that bills can run to more than $3,000 and the statements themselves can be 50 pages long.

The FPA clearly believes the non-tax deductible nature of initial advice statements may run to the letter of legal precedent but in practice it actually repels those who are — by definition — most in need of advice.

Making all financial advice fees tax deductible would make a lot of sense to a lot of people, not just financial planners.