The Tax Office has published guidance for individuals who are not in business for claiming tax deductions for fees paid to financial advisors.
Financial Advice Fees Tax Deduction – Tax Determination
Draft Taxation Determination TD 2023/D4 “Deductions for financial advice fees paid by individuals who are not carrying on a business” was released on 13 December 2023 with comments sought by 2 February 2024.
The draft ruling provides references to sections of the tax legislation which guide deductibility in principle.
Four example scenarios provide some clarity in this regard.
Example 1 – initial advice arrangement – partially deductible
A deduction for tax (financial) advice can be claimed, but not for initial (pre-investment) advice because it is capital or of a capital nature and does not have a sufficient connection with earning income from the investment.
Example 2 – continuing arrangement – partly deductible
A deduction can be claimed for ongoing advice because it is incurred in the course of gaining or producing assessable income, but not for budgeting advice which is considered to be private or domestic and not related to tax affairs.
Example 3 – advice in relation to insurance policies not deductible
A deduction can be claimed for the tax (financial) advice, but not for advice on life, total and permanent disability and trauma insurance policies because it is considered to be capital or of a capital nature.
Example 4 – superannuation, welfare benefits advice and estate planning not deductible.
A deduction can be claimed for tax (financial) advice and in relation to salary sacrifice arrangements, but not for the establishment of a self-managed superannuation fund because it is considered to capital or of a capital nature.
The source of these summaries should be read in full for the best understanding of the deductibility principles being applied.
Apportionment of Advice Fees When Necessary
Appropriate apportionment of advice fees is required in order to attribute costs on a reasonable basis to the different purposes of the advice.
The ruling specifies that sufficient evidence must be available to support the method of apportionment, otherwise no deduction is allowed.
Draft determination TD 2023/D4 replaces Taxation Determination TD 95/60 with no material change in view.
this page was last modified 2023-12-14