Edited version of private ruling

Authorisation Number: 1011655927131

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Ruling

Subject: Deduction- ongoing adviser fee

Are you entitled to a deduction for the ongoing adviser and account keeping fees?

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

· a private ruling application

· a copy of a cash account statement (CAS)

· a copy of payment summary .

You receive a monthly pension amount from a superannuation fund.

Your pension plan CAS for the period shows the following fees were paid:

· account keeping fees

· ongoing adviser fee

· trustee fee.

The fees are incurred within the trust and debited to your account.

Any earnings such as interest and dividends are credited to your account.

You meet with your financial advisor annually and you also stay in contact with your financial advisor to ensure the mix of your portfolio investment provides enough cash to receive your pension income.

You can change the investment mix after you receive advice from your financial advisor.

The ongoing advisor fee is paid to provide advice in regards to an investment strategy and to review your investment.

You are not billed separately for the meeting held with the financial advisor.

The fees are deducted on a monthly basis from your cash account.

These fees are deducted prior to the distribution of your pension to you.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 27H.

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Section 8-1 of the Income Taxation Assessment Act 1997 (ITAA 1997) allows you to deduct from your assessable income any loss or outgoing to the extent it is incurred in gaining or producing assessable income.

The Commissioner's view on the deductibility of ongoing management fees was originally set out in Taxation Ruling IT 39 and subsequently in Taxation Determination TD 95/60. In both instances it was determined that where such fees were incurred in servicing an existing investment portfolio the cost was deductible to the extent that the portfolio produced assessable income. Although not specifically stated in the determination it was an inherent part of the decision that the assessable income referred to would be the assessable income of the taxpayer and not the assessable income of some other taxpayer such as a superannuation fund.

In your case, the funds contributed to the pension plan are held by your superannuation fund in trust for you, and the account keeping, trustee and ongoing adviser fees are debited to the cash account within the fund. You do not derive any income from these investments that is assessable income in your hands as any income earned by the fund is assessable income to the fund.

You receive an allocated pension from the fund which is included in your assessable income under section 27H of the Income Tax Assessment Act 1936.

You have therefore only being assessed on the 'net' amount of your pension, that is, after the fees have been taken into account by the fund.  

Accordingly, no further deduction is available under section 8-1 of the ITAA 1997 for any of the fees incurred in managing your pension plan account with the superannuation company.