Throughout different life stages, many Australians consider professional financial advice to improve and secure their financial future. A key question regarding the affordability of this advice is: Are financial advice fees tax-deductible?
A recent tax determination by the Australian Taxation Office (ATO) has provided additional guidance upon the tax deductibility of certain financial advice fees.
While this does not change the requirement that the expense is incurred in gaining or producing assessable income, it does highlight the circumstances when financial advice fees satisfy that connection.
Ongoing advice, fees for reviewing investments, making periodic recommendations, or managing income protection insurance can generally be deducted.
Not Tax-Deductible:
- Initial advice on new investments or plans before they are purchased
- Advice on investing additional funds to grow an existing portfolio
- Fees for engaging a new advisor in relation to an existing portfolio
Tax-Deductible:
- Ongoing advice for current portfolio recommendations and reviews.
- Advice upon income protection insurance.
Both
Where a fee is not fully deductible, you will need to use a ‘fair and reasonable’ method to apportion based on the services provided.
Balancing Costs and Benefits
Where initial fees may not be deductible, they may still qualify as an incidental cost for the asset purchase and form part of it’s cost base. With the ongoing management costs of the portfolio and investments deductible, this should encourage more to seek professional assistance to keep an eye on their investments. This will assist in the affordability of ensuring your investments remain appropriate for both the current market as well as your stage of life.