When you’re considering the expenses you can claim as deductions in your tax return, are the fees you pay your financial adviser among them? Well, yes and no! There are limits on what can be claimed.

In a recent tax determination, the ATO clarified the types of fees that an individual taxpayer can now claim.

So, which fees can you claim?

The fees you pay to your financial adviser that can be claimed include those for advice on expenditure that’s incurred “in the course of gaining or producing assessable income”. Some examples are:

• fees that have been incurred specifically for managing your tax affairs; this could include advice about, for example, salary sacrifice, or how tax laws relate to your investments;
• management fees for an existing or ongoing investment; usually these will recur annually or semi-annually;
• fees for advice on the suitability and performance of your current investment portfolio; and
• fees for advice on income protection insurance products.

A further requirement is that you must have paid the fees yourself – so you can’t claim for fees paid through your super fund. While some advice fees can be paid through super on the member’s request, a tax deduction is only available to the super fund. The deduction is not available to any other entity, including the fund member or the adviser.

Which fees are not deductible?

You can’t claim a deduction for fees that apply to financial advice on any loss or outgoing that’s not incurred in “gaining or producing” your assessable income, or any amount that’s capital or of a capital nature.

So, when you meet with a new adviser, the fees charged for the commencement of that new advisory engagement cannot be claimed, nor can the initial advice on a proposed income-earning investment.

Other examples of when fees can’t be claimed include advice on:

• how to invest additional funds to increase your current investment portfolio;
• taking out life, total and permanent disability or trauma insurance – as the premiums for these types of insurance products are not deductible; and
• household budgeting, as these expenses are private or domestic in nature.

Itemising fees

Importantly, you’ll need invoices from your adviser to clearly itemise the details of their advice so that deductible claims can be easily distinguished and correctly apportioned.

This apportionment needs to separate, for example, advice on managing tax affairs from advice on outgoings that are capital in nature, and needs to do so on a “fair and reasonable basis”. Determining this qualification will depend on the facts and circumstances of the case.

But generally, an itemised invoice from a financial adviser which clearly details an explanation of the advice provided should be sufficient to claim a deduction.

To ensure that you claim all the deductions you’re entitled to in this complex area, informed and up-to-date advice is critical.