This development impacts how financial advisors and accountants structure their fee models, particularly in terms of claiming tax deductions for financial advice fees. According to David Barrett, FAAA's senior manager of policy and advocacy, most traditional models where fees are paid from self-managed super funds might not provide personal tax deductions. Such situations necessitate a reassessment of billing strategies to ensure maximum tax efficiency for clients.
Advisors may need to shift towards alternative billing methods, such as direct client billing or using master trust, wrap, or IDPS deductions, to enhance tax-deductibility. Conrad Travers from Tangelo Advice Consulting highlighted that such a shift could also simplify compliance with the sole purpose test. This adjustment focuses on understanding the nature of the advice being given, whether it pertains to a member's individual capacity or their role as a trustee, which could affect the deductibility outcome. As Barrett noted, while some uncertainties remain, particularly concerning trustee advice, he believes there are still untapped possibilities for enhancing tax deductibility. Advisors need to consider these updates carefully to optimize their clients' tax positions.
