If you invest in shares you may be able to claim as a deduction from assessable income certain expenditure incurred in deriving your income from those shares. The following are examples of expenses that may be deductible.
Management fees
Where you pay ongoing management fees or retainers to investment advisers you will be able to claim the expenditure as an allowable deduction. Only a proportion of the fee is deductible if the advice covers non-investment matters or relates in part to investments that do not produce assessable income. You cannot claim a deduction for a fee paid for drawing up an initial investment plan.
Interest
If you borrowed money to buy shares you will be able to claim a deduction for the interest incurred on the loan, provided it is reasonable to expect that assessable dividends will be derived from your investment in the shares. Where a loan was obtained for more than one purpose, you will only be able to claim interest incurred on that part of the loan used to acquire the shares.
FID and other taxes
State governments charge Financial Institutions Duty (FID), government duty tax (GDT) and debits tax for operating certain types of accounts held with financial institutions such as banks, building societies and credit unions. You can claim a deduction for any FID charged on the deposit of assessable dividend income into your accounts. You can also claim a deduction for that part of any GDT or debits tax charged on debits from your account used to fund deductible expenses in relation to earning dividend income. If only a proportion of the debit was used to fund deductible expenses, then only the same proportion of GDT or debits tax is deductible.
Travel expenses
You may be able to claim a deduction for travel expenses where you need to travel to service your investment portfolio-for example, to consult with a broker or to attend a stock exchange or company meeting. You can claim a deduction for the full amount of your expenses where the sole purpose of the travel relates to the share investment. Where the travel is predominantly of a private nature, only the expenses which relate directly to servicing your portfolio will be allowable.
Cost of newspapers and journals
You may be able to claim the cost of purchasing specialist investment journals and other publications which you use to manage your share portfolio.
Borrowing expenses
You may be able to claim expenses you incurred directly in taking out a loan for purchasing shares which can reasonably be expected to produce assessable dividend income. The expenses may include establishment fees, legal expenses and stamp duty on the loan. If you incurred deductible expenses of this kind totalling $100 or more they are apportioned over 5 years or the term of the loan, whichever is less. If your expenses are less than $100, they are fully deductible in the year you incur them.
Other deductions
Any other expenses that you incur which relate directly to maintaining your portfolio are also deductible. These could include bookkeeping expenses and postage.
Expenses that are not deductible
You cannot claim a deduction for the cost of acquiring shares-for example, expenses for brokerage and stamp duty. These will form part of the cost base for capital gains tax purposes when you dispose of the shares. For more information, see the publication Personal investors' guide to capital gains tax.