Claiming financial advice fees
You can claim deductions for fees you pay to your financial adviser, however there are limits on what you can claim. We outline below what you can and can't claim.
To be deductible, you must pay the financial advice fees yourself. For example, you can't claim a deduction if the amount comes from your super fund member’s balance.
If you seek financial advice for multiple purposes, you may not be able to claim a deduction for the full amount of the fees. You need to apportion the fees and keep records to support your apportionment. For example, an itemised invoice from your financial adviser.
What you can claim
You can claim a deduction for financial advice fees in limited circumstances, including:
- ongoing advice fees for income producing investments (for example, regular annual or semi-annual reviews of the performance of your investments)
- fees for advice about whether the mix of your income producing investments is still appropriate and whether to keep or sell those assets
- fees for advice on income protection insurance products
- the portion of the fees to the extent that it relates to managing your tax affairs. For example, advice on how the tax laws apply to your personal circumstances.
There are different rules for deductions when you engage a new financial adviser, see New financial adviser fees.
What you can’t claim
You can’t claim a deduction for financial advice fees you pay for:
- initial advice on a proposed investment (but you may be able to include these costs in your cost base or reduced cost base to work out your capital gain or loss when you sell the investment)
- advice on how to invest additional funds to grow your existing investment portfolio
- advice on taking out life, total and permanent disability or trauma insurance
- advice about your household budgeting (those are private or domestic expenditure and not deductible)
- advice where fees are paid from your superannuation fund.
For more information, see Taxation Determination TD 2024/7 Income tax: deductions for financial advice fees paid by individuals who are not carrying on an investment business.
New financial adviser fees
If you pay financial advice fees to a new financial adviser, you may not be able to claim a deduction. The availability of a deduction will depend on your individual circumstances.
Example: fees deductible
Max has been receiving financial advice from Kathy for several years. Kathy works as an adviser for a financial advice firm and has decided to retire. All of Kathy's clients are taken over by Marina who is another adviser at the same firm.
Marina reviewed Max's file and provided advice on his pre-existing investments. Marina did not review Max's income earning structure (that is, the way Max earned income through investments).
Although a change in financial adviser has occurred, Max can claim a deduction for the financial advice provided by Marina as the advice relates to existing or ongoing income-producing investments and does not involve Marina making recommendations and advising on Max's income earning structure.
End of example
Example: fees not fully deductible - new owners
Shahab has been receiving financial advice from a financial advice firm for many years. Shahab's current adviser Komi advised that the financial advice firm has been acquired by new owners and that Shahab's file has been passed on to Lucia; an adviser with the new firm.
Shahab sees this as an opportunity to re-evaluate his investment portfolio and asks Lucia to conduct a detailed review of his entire financial circumstances.
Lucia provides Shahab with advice in relation to his existing investments and recommends he acquire new investments. Lucia then provides Shahab with an itemised invoice setting out the portion of the advice fee related to managing his tax affairs.
In these circumstances, Shahab will not be able to claim a deduction for the full amount of the financial advice fees paid. This is because part of the advice involves:
- a new advisory engagement
- a detailed review of Shahab's circumstances for the first time by Lucia
- recommendations and advice on Shahab's income earning structure (that is, the way Shahab earned income through investments).
Shahab would be able to claim a deduction for the portion of the fee for the advice that relates to managing his tax affairs.
End of example
Example: fees not fully deductible - new advice firm
Sara recently decided to move from Melbourne to the Sunshine Coast in Queensland. Sara previously received financial advice from an adviser located in Melbourne. Following her move, Sara sought financial advice from a new local financial adviser.
When Sara met with her new financial adviser Ally, she asked to simplify her investments and adopt a more passive income earning structure. Ally undertook a detailed review of Sara's entire personal circumstances and constructed a new client record. Ally recommended that Sara dispose of some of her pre-existing assets to free up cash to purchase a rental property. She also advised Sara to purchase shares in companies that provide stable returns.
In these circumstances, Sara cannot claim a deduction for the full amount of the financial advice fees paid as her new advisor Ally considered her circumstances for the first time and made recommendations and provided advice in relation to Sara's income earning structure (that is, the way Sara earned income through investments).
Sara can claim a deduction for the portion of the fee for the advice that relates to managing her tax affairs.
End of example