When reviewing the expenses you can claim as deductions on your tax return, are the fees you pay to your financial adviser among them? The answer is both yes and no! There are specific limits on what can be claimed, and the ATO has recently clarified the types of fees that individuals can claim.

Which Fees Can You Claim?

You can claim fees paid to your financial adviser for advice related to expenditure incurred “in the course of gaining or producing assessable income.” Some examples of deductible fees include:

• Fees related to managing your tax affairs: This could involve advice on salary sacrifice or how tax laws affect your investments.
• Management fees for ongoing or existing investments: These fees are typically recurring on an annual or semi-annual basis.
• Fees for advice on the suitability and performance of your current investment portfolio.
• Fees for advice on income protection insurance products.

There’s also a key condition: you must have paid the fees yourself. Fees paid through your super fund are not deductible to you. While some advice fees can be paid through super at the member’s request, the deduction is available only to the super fund and not to any other entity, including the fund member or adviser.

Which Fees Are Not Deductible?

You cannot claim a deduction for fees related to advice on matters that are not incurred in “gaining or producing” your assessable income, or any amounts that are capital in nature. Here are some examples of non-deductible fees:

• Initial fees for starting a new advisory engagement or advice on proposed income-earning investments.
• Advice on how to invest additional funds to expand your current investment portfolio.
• Fees for advice on taking out life, total and permanent disability, or trauma insurance (as premiums for these types of insurance products are not deductible).
• Household budgeting advice, as these expenses are considered private or domestic.

Itemising Fees

It’s essential to have invoices from your adviser that clearly itemise the details of the advice provided. This will allow you to distinguish deductible claims from non-deductible ones and ensure the correct apportionment of fees. For instance, advice on managing tax affairs must be separated from advice on capital-related outgoings, and the apportionment must be done on a “fair and reasonable basis.”

Generally, an itemised invoice from a financial adviser, detailing the explanation of the advice provided, should be sufficient to claim a deduction.

To ensure you’re claiming all the deductions you’re entitled to in this complex area, it’s crucial to seek informed and up-to-date advice. The rules around financial advice fees and tax deductions can be tricky, so it’s important to keep proper records and consult with a tax professional if needed.