Are financial planning fees tax deductible in Australia?

Many clients want to know whether fees charged by their financial adviser are tax deductible. Generally speaking, you may claim a tax deduction on fees paid for investment advice, provided that the costs are related to advice given which leads to or is directly associated with a specific investment that produces assessable income. 

The following fees are not tax deductible as they are not related to producing assessable income:

  • General financial advice
  • Financial plan preparation
  • Initial investment advice
  • Upfront fees
  • Advice regarding non-assessable pension income 

This is because the above fees have not yet contributed to your assessable income (annual taxable income). If you receive advice to alter an existing investment portfolio that generates taxable income as part of your ongoing portfolio management, these fees may be tax deductible. The same goes for ongoing advice fees or retainers, where the advice is in relation to generating income associated with your investment portfolio. 

These same principles apply to self-education expenses such as attending seminars. If you attended a seminar to educate yourself on how to invest, then the fee would not be tax deductible. If, however, you attend the seminar to improve on your current investment portfolio, this is tax deductible. 

If you receive and pay for advice in relation to an investment loan and the purpose of the loan was to generate taxable income, the costs may be deducted over the lesser of five years or the life of the loan – whichever is shorter. 

What you can and cannot claim for in relation to financial planning is managed under section 8.1 of the Income Tax Assessment Act (ITAA 1997). In short, however: 

If the financial planning advice is to establish a plan or the advice does not relate to assets or investments that presently generate taxable income, then the advice fees are not tax deductible. 

If the advice expense is in relation to ongoing advice for an existing portfolio then the expenses may be deductible.

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