IRD to change the rules on planning fees
After losing several cases the IRD is going to change the rules relating to the deductability of financial planning fees.
Monday, September 6th 1999, 12:00AM
It is seeking feedback on the new proposals that are intended to replace the binding rulings it released in 1996. (Click here to see a copy of the latest "interpretation statement").
IRD says the current public ruling will cease to apply from the end of the 1998-1999 income year.
New rules are being developed for a number of reasons including the difficulty it has had in applying the rules to the three categories (establishment, implementation and monitoring) of fees. This has become apparent in the cases recently reported by Good Returns.
In these cases there has been dispute over what is an establishment fee. The Taxation Review Authority has said that a person with existing investments, such as bank deposits, already has a portfolio.
If that person goes to an adviser, who then rearranges the investments, the fees charged are deductible as the portfolio is already established.
Under the new proposals IRD plans to increase the number of fee categories from three to seven.
"The new categories are based on the process of obtaining an initial financial plan, the subsequent monitoring of that plan, and any following adjustments or alterations to the plan. Other incidental tax law issues that may be encountered are also dealt with in this statement," IRD says.
The statement also reconsiders the deductibility of fees incurred by business and speculative investors before commencing their business or speculative activities.
Under the new proposals most fees are deductible. The main exceptions to this are initial planning and implementation fees for passive investors.
The deadline for submissions on the new statement is October 31.
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