With tax time just around the corner, you’re probably starting to think about what you can and can’t claim. If you’ve been working with a financial advisor, you might be wondering: can you claim financial advisor fees on tax? It’s a great question and one that a lot of people don’t fully understand.
The good news is yes, you can claim financial advisor fees. But not all financial advice is treated equally by the ATO. Some fees are deductible, while others aren’t. And with the latest finalised ATO determination (TD 2024/7), there’s now more clarity around what qualifies and what doesn’t.
So, whether you’re looking to make the most of this year’s return or want to start the new financial year on the right foot, here’s what you need to know.
Are Financial Advisor Fees Tax Deductible?
Let’s break it down simply. Financial advisor fees can be tax-deductible but only when the advice is directly related to managing your tax or income-producing investments.
There are two key areas where the ATO says you may be able to claim:
1. Ongoing Investment Advice
If you already have investments that are generating income like shares, property, or managed funds and you’re paying a financial advisor to help you manage those, those fees are likely deductible.
Here’s what counts:
- Advice on how your current portfolio is performing.
- Suggestions to rebalance or adjust existing investments to keep them income-producing.
So, if your advisor is helping you manage what you already own, not just suggesting new things to buy, you might be able to claim those fees on tax.
2. Tax Management Advice
This is where things get more straightforward. If your advisor is helping you directly with your tax affairs, there’s a good chance you can claim that advice as a deduction, especially if they’re a registered tax agent or registered tax financial advisor.
This might include:
- Salary sacrifice planning.
- Understanding tax on your super contributions.
- Capital gains tax strategies.
- Other advice aimed at minimising your tax bill legally.
Basically, if the advice is clearly about managing your tax affairs, it’s generally deductible.
3. Advice Related to Income Protection Insurance Products
Fees for advice on policies that replace your income if you’re unable to work due to illness or injury are generally deductible.
Further, to claim a deduction, the financial advice fees must be paid by you personally. If they’re paid from your super fund (ex: deducted from your member balance), they generally aren’t tax-deductible on your individual return.
What Can’t You Claim in Financial Advice Fees?
Not all financial advice is tax-deductible, and this is where things can get a little tricky. Some types of advice just don’t meet the ATO’s criteria, even if they feel financially important to you.
- Initial advice on a proposed investment – You can’t claim upfront advice when you’re deciding whether or not to invest.
- Advice on investing new money, even if it’s to grow your current portfolio.
- Fees from starting with a new financial advisor or getting a first-time financial plan.
- Any advice related to taking out life, TPD (Total and Permanent disability), or trauma insurance.
- Personal budgeting advice, as it’s considered private and non-deductible.
Financial Advice Tax Deductible: A Quick Summary of What You Can and Can’t Claim
Why This Matters Now?
With tax time approaching quickly, now’s the time to take a closer look at your financial advice fees. If you’ve been paying for eligible investment or tax-related advice as mentioned above, you could be leaving money on the table if you don’t include those deductions.
For those considering financial advice for the upcoming year, now is the ideal moment to get clear on how these deductions work, so you’re fully prepared for the next financial year. Keep in mind that ATO rules and regulations are always evolving, so staying updated is key to make informed decisions.
Got Questions About Financial Advice Tax Deductions?
If you’re already a client with us, you’ve likely received information on this. However, if you have any questions, feel free to speak directly with your advisor.
If you’re new to Yield and looking for financial advice, get in touch with us today. Our team of experts is here to guide you every step of the way on your financial journey. We’ll help you navigate everything, from understanding tax deductions to staying updated with the latest changes. We’re here to make sure you’re always in the know and never caught off guard.
