Edited version of private ruling

Authorisation Number: 1011825909076

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Ruling

Subject: Deduction- advisor fee

Question:

Are you entitled to a deduction for the advisor fees?

Answer:

No.

This ruling applies for the following period

Year ending 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014

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 number of letters from a superannuation fund

· a copy of your statement of account

· a copy of a statement of advice prepared by a financial planner

· a copy of your financial planning investor profile and

· a copy of a newsletter.

You invested in a pension plan.

You receive an allocated pension.

Your statement of account shows that you paid advisor fees.

You meet with your financial advisor once a year to reassess your portfolio.

You also stay in contact with your financial advisor on a regular basis and receive various correspondences in relation to the Australian and International markets.

The advisor fees are deducted on a monthly basis prior to you receiving your allocated pension.

You are not billed for the advisor fees.

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 Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. 

The question of the deductibility of advisor service fees is determined under section 8-1 of the ITAA 1997. The Commissioner's view on the deductibility of fees for servicing an investment portfolio 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.

We acknowledge that you have regular contact with your financial advisor; however, you are not billed for these fees separately. In your case, the funds contributed to the pension plan are held by your superannuation fund in trust for you, and the advisor fees are debited to your 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 superannuation fund which is included in your assessable income under section 27H of the Income Tax Assessment Act 1936.

The advisor fees have been taken into account before the allocated pension payment has been made and included in your assessable income. You have therefore only being assessed on the 'net' amount of your pension, that is, after the advisor fees have been taken into account.  

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