Is Financial Planning Advice Tax Deductible?

Reducing the amount our legal tax obligation is a key focus for many individuals, particularly those in the top tax bracket where every extra dollar earned may see you donating up to 47% (including Medicare Levy) of that dollar to the ‘tax man’.

Getting financial advice is also an important step in creating a solid financial plan for investors, however the cost of financial advice in the long-term can be high and this may be the reason why so many investors attempt to take care of their own financial planning needs without seeking professional advice. It is therefore important to educate investors on how they can use their financial planning advice fees to reduce their taxes and, in doing so, assist in making financial planning advice an affordable service to consider for the long-term.

According to current legislation, and in broad terms, a tax deduction may be claimed on fees paid for investment advice, provided that the fees relate to advice given which leads to, or is directly associated with, a specific investment which produces assessable income. In other words, is the cost which you have incurred due to the process of producing additional taxable income? If so, the cost of the advice becomes tax deductible. Some examples of deductible advice fees are:

  • Recurring or ongoing fees paid for the management of income-earning investment assets such as investment properties or share portfolios.

However, if the fees paid are not related to a specific investment producing assessable income, it will not be deductible. Some examples of non-deductible advice are:

  • Fees for preparing a financial plan, e.g. a Statement of Advice
  • Initial investment or advice fees paid to establish an investment
  • Ongoing fees relating to the management or monitoring of superannuation assets or personal insurances, as these financial products do not generate assessable income – however, these fees may be tax deductible to your superannuation fund

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