Can You Claim Financial Advice Fees on Your Tax Return?

If you’re paying for an adviser, it’s natural to wonder whether you can claim financial advice fees on your tax return. Fortunately, the Australian Tax Office (ATO) allows some financial advice fees to be claimed as tax deductions, but there are specific rules about what’s eligible. To help you navigate this, let’s take a closer look at which fees you can claim, and how to ensure you get the most out of your deductions.

Which Financial Advice Fees Are Deductible?

In Australia, you may be able to claim a tax deduction for financial advice fees, but only when the advice is related to your investment strategy, superannuation, or insurance needs. It’s also worth noting that the fees need to paid personally to be eligible. If fees are paid from your superannuation account, it is not deductible. Below are the key areas where financial advice fees might be deductible:

1. Fees for Investment Advice

If your financial adviser helps you with managing investments such as stocks, bonds, or managed funds, the costs associated with this type of advice can often be claimed. This can include strategies around structuring your portfolio, managing capital gains tax, or improving your overall tax situation by focusing on tax-efficient investment options.

2. Superannuation Advice Fees

Superannuation is an essential part of your long-term retirement planning. If you’re receiving advice on how to manage, contribute to, or structure your super fund, those advisory fees could be deductible. This also includes any guidance on reducing tax or boosting your superannuation balance.

However, if the advice is purely about general retirement planning (such as suggesting how much to contribute to super without any investment-related advice) it is likely not deductible.

3. Insurance-related Advice Fees

Some financial advisers provide assistance with choosing insurance products, including life insurance and income protection. If this advice is linked to your investment strategy or superannuation fund, it may be deductible. But if the advice focuses solely on your personal insurance needs, unrelated to investment or super, then the fees are typically not deductible.

What Financial Advice Fees Are Not Deductible?

While financial advice can offer tax benefits, it’s important to be aware of the kinds of fees that won’t be eligible for tax deductions. Here’s what generally doesn’t qualify:

1. Personal Financial Advice

Any advice you receive about personal financial matters, such as helping you decide on buying a home, managing a family budget, or choosing personal life insurance, won’t be deductible. The ATO only permits deductions for advice that is related to your investments or retirement planning, not your day-to-day personal finances.

2. General Financial Advice

Advice that is broad and not tailored to your individual needs is also not eligible for tax deductions. This could include general market insights or investment strategies that aren’t specific to your personal situation. The ATO wants to see that the advice is directed at improving your investment strategy or superannuation management.

3. Superannuation Advice for Personal Funds

When financial advisers help you with personal superannuation decisions, such as how to select investment options for your super fund, these fees may not be deductible. However, if the advice is for a Self-Managed Super Fund (SMSF), where the advisor helps with compliance, administration, or investment decisions, those fees could be eligible for a tax break.

4. Fees for Legal Services (e.g., Wills and Estate Planning)

While financial planners may offer services that involve managing your estate planning and helping you create strategies to reduce taxes for your beneficiaries, legal fees, such as for drafting a will, are not deductible. The ATO doesn’t allow tax deductions for fees related to personal legal matters.

How to Claim Financial Advice Fees

If you’ve received deductible financial advice, here’s how you can claim those fees on your tax return:

1. Keep Detailed Records – It’s important to retain all documentation, such as invoices or statements, that outline what services were provided. Make sure the invoices clearly distinguish between advice that relates to your investments or superannuation and personal advice, as only the former is deductible.

2. Separate the Deductible from the Non-Deductible – If you’ve received both personal and investment-related advice, you’ll need to apportion the fees accordingly. For example, if your adviser spent time advising you on your investment portfolio and also provided some advice about your personal financial situation, you can only claim the portion that is linked to your investments or superannuation.

3. Include It in Your Tax Return – When you file your tax return, include the deductible fees in the “Other Deductions” section. You’ll need to report how much you paid for investment and superannuation-related advice that’s eligible for tax deductions.

Superannuation and SMSF: The Specifics

One area that often causes confusion is the treatment of fees related to superannuation and Self-Managed Super Funds (SMSFs):

• Superannuation Advice for Personal Funds: If the advice is simply related to choosing which investment options to use for your personal super fund, it likely won’t be deductible. This is because the advice is more about your long-term financial goals rather than your investments themselves.

• SMSF Advice: If you’re receiving help with setting up or managing an SMSF, those fees may be deductible. The advice must be focused on managing the SMSF itself, not just broad retirement strategies.

Ongoing Financial Advice Fees

Many people pay ongoing fees for continued financial advice. Good news – if the ongoing advice is linked to your investments or superannuation, these fees are generally deductible as well. Just ensure that the advice is focused on managing your investment portfolio or your superannuation balance, as personal financial advice won’t count.

Managing Your Financial Advice Records

It’s great to know that some of the fees you pay for financial advice could reduce your tax bill. To take full advantage of these deductions, make sure to:

• Keep clear records of what services you’ve paid for.

• Separate personal and investment-related advice so you only claim what’s eligible.

• Check with your financial adviser or a tax professional to ensure you’re claiming correctly.