It’s an interesting quandary and one I do not expect a resolution upon soon.
Tax deductibility is an interesting beast. From my experience meeting with hundreds of clients in various roles over the years, it sits at the forefront of most taxpayer’s minds.
I would wager that most people could give you a firmer answer on the chances of discretionary purchases being tax deductible (think sunglasses, fancy printer at home, mobile phone, ceremonial swords?) than when their spouse’s birthday is.
Simply put, if a cost is incurred that can be reasonably applied against taxable income derived from this cost, it should be tax deductible. This rationality extends to most investments, and seems to over extend for investment properties, but we will leave that fight for another day.
It’s a fantastic guiding tool for government. An effective public subsidisation for the types of behaviour (donations come to mind) and spending that is deemed to need encouraging.
So where does financial advice fit in the current edict of government and what are the chances that our sovereign overseers might come around on the value of long term advice?
On one hand, it can be argued that financial advice, unlike say tax return preparation from an accountant (remembering that most accountants don’t generally provide personal advice), is a means to the creation of a gain of some sort, and if that gain is taxable, then shouldn’t it make this cost deductible?
This gain can, of course, be quantified in a financial sense, however as a value proposition can extend much further, including ensuring a better quality of life, financial protection and subsequent reduced reliance on the public purse both now and retirement.
Given the somewhat dubious track record of advice, you can understand the hesitation in providing public subsidisation. Can’t blame them.
But it’s fair to say the scenario is changing now. Education and professional standards have been lifted (and enforced) and traditional (questionable?) remuneration methods have evaporated from most products since the beginning of the Future of Financial Advice reforms in 2012. As the sector improves in the public eye and continues to create better outcomes for clients.
I am a strong advocate for financial advice to become more affordable and accessible than it is today, we are trying in our own way, through cutting costs and delivering fit for purpose advice on our investments through Nucleus Wealth.
We feel this is an ideal solution for people comfortable dealing with people over the internet and phone, but what about those who need to sit down and discuss more complicated matters?
This is where a face to face experience is going to stand the highest chance of a great outcome, and it’s hard to cut costs from physical offices, staff and pot plants. For quality advice to be feasible for those who potentially need it the most, it seems fair that support is given through such a traditional lever as a tax break.
Brass tacks? If the government is comfortable with the response to legislation and the new direction of the advice industry (and the 22,000 advisers within it) then it should, in turn, respond with one of the most confirmative public gestures – the tax deduction.
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