Financial planning fees, are they tax deductible?

We are often asked if financial adviser fees are tax deductible. The answer is not simple – it is the old ‘yes and no’! Let us explain why…

It’s a ‘yes’ if…

The answer is yes if the service relates to producing assessable income (income you include in your tax return). For example, you may claim a tax deduction on fees paid for investment advice.

The following fees are generally tax deductible because they will have been in relation to earning assessable income during the financial year:

  • Advice to alter an existing investment portfolio that generates taxable income as part of your ongoing portfolio management
  • Ongoing advice fees or retainers, where the advice is in relation to generating income associated with your investment portfolio
  • Attending a seminar to improve on your current investment portfolio.
It’s a ‘no’ if…

The answer is no if the service does not relate to producing assessable income. For example:

  • General financial advice
  • Financial plan preparation/establishment
  • Initial investment advice and upfront fees
  • Advice regarding non-assessable pension income
  • Attended a seminar to educate yourself on how to invest
  • Advice on cash flow management and other expenses, such as insurance
  • Advice on management of private loans

These fees are not deductible because they have not yet helped you to produce assessable income.

Other things to think about

It’s also worth noting that fees for advice in relation to investments for a superfund are only deductible to the super fund itself if the fund has paid for the advice; this is not deductible personally.

Initial fees for establishing a financial plan or investment portfolio are considered a capital expense and not tax deductible, however any recurring fees or retainers you might pay for your financial adviser to maintain them may be.

The ATO has useful information on tax deductions for investment advice: Tax Determination (TD95/60).

We hope this was helpful, if you need any financial planning services please contact us for a chat about what you’re trying to achieve and we’ll be able to support you!

Thanks and happy investing.