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Financial Adviser Guidance
Helping you provide exemplary advice to Australians.
The FAAA provides guidance broadly on topics of special interest to the financial advice community. Some guidance is for FAAA members only and some guides are available publicly as it is in the interest of the profession.
You can find our current guidance documents on this page.
Tax Deductibility of Financial Advice Fees Guide
The FAAA, in collaboration with Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants, has produced practical guidance for financial advisers to help determine whether all or part of a financial advice fee is deductible, how much may be claimed as a deduction and what records clients should keep to substantiate their claims.
The Australian Taxation Office released guidance regarding the tax deductibility of financial advice fees, Tax Determination TD 2024/7, on 25 September 2024.
TD 2024/7 outlines the circumstances in which individuals may be entitled to claim deductions for financial advice fees under section 8-1 (general deductions) or section 25-5 (tax-related expenses) of the Income Tax Assessment Act 1997.
See the FAAA media release here.
The below guides and documents, to help substantiate a tax deductibility claim, are publicly available:
Further help and references
- On-demand webinar - Tax determination on financial advice fee deductibility explained (presented by Conrad Travers & David Barrett)
- Australian Taxation Office - Tax Determination TD 2024/7
- Australian Taxation Office - Financial advice fees: Deductions you can claim for fees you pay to a financial adviser
- Australian Investments and Securities Commission - Information Sheet 268: Relevant providers who provide tax (financial) advice services
- Tax Practitioners Board - TPB(I) 20/2014 What is a tax (financial) advice service?
FAQs
I had thought that initial advice fees are generally non-deductible. What’s changed?
TD 95/60 (‘Old Determination’, now withdrawn) only covered the application of the general deductibility provision (section 8-1 of the Income Tax Assessment Act 1997) to investment advice fees. Initial advice fees are not generally deductible under section 8-1 because they are generally considered to be capital in nature.
TD 2024/7 (‘New Determination’) covers both section 8-1 and section 25-5. The New Determination reflects the ATO’s view that tax (financial) advice is considered to be included in managing your tax affairs. Furthermore, tax (financial) advice about financial issues of a capital nature may be deductible under section 25-5.
Tax (financial) advice is financial advice about the taxation laws the Commissioner of Taxation has general administrative responsibility for, including (but not limited to):
- Income Tax Assessment Act 1997
- Income Tax Assessment Act 1936
- Fringe Benefits Assessment Act 1986
- Superannuation Guarantee (Administration) Act 1992
- Superannuation Industry (Supervision) Act 1993 (to the extent the advice relates to self managed superannuation funds)
As a consequence, the level of deductibility of initial advice fees is likely to be much greater than was previously claimed. The deductibility of ongoing advice fees is also likely to be greater than previously claimed, to the extent the advice is tax (financial) Advice.
My advice firm generally charges a separate fee for initial meetings with new clients. Is this fee, or any portion of it, tax deductible?
Tax Determination TD 2024/7 states the ATO’s views on the application of section 25-5, in particular the circumstances when tax (financial) advice fees are deductible under this section. Tax (financial) advice is generally provided as part of personal advice. Personal advice is not generally provided in an initial meeting with a new client.
It follows that a fee charged to a new client for an initial meeting will not include tax (financial) advice fees, so no deduction will generally be available on that basis.
My client pays an annual fee in April each year, which covers all advice and services for 12 months. She lodges her own tax returns, generally due by 31 October. How do I apportion this fee for tax deductibility purposes given the fees have been paid in advance of the service?
Subject to further clarification on this issue from the ATO, it is suggested that an adviser should apportion the fee for tax deductibility purposes based on their assessment of the services expected to be provided in the year ahead. This assessment could be based on, for example:
- previous years, as a guide
- the current circumstances of the client, and
- their likely advice needs in the year ahead.
If there are material changes in the advice actually provided, compared to the estimate provided, your client may make an amendment to their tax return to adjust the claim. It is recommended that the amendment be substantiated with a revised apportionment statement from the financial adviser.
Individuals generally have two years to amend an income tax assessment, but can lodge an objection outside of this period.
My financial advice fee relates to advice that is provided throughout the year, and not on one particular date. How do I record that on my invoices, etc?
TD 2024/7 sets out the evidentiary requirements for individuals claiming a tax deduction for financial advice fee expenses. It states that an itemised invoice or fee summary from a financial adviser will be sufficient evidence to be entitled to claim a deduction, where the invoice or fee summary details the following:
- adviser’s name
- fee amounts
- explanation of advice provided
- date of advice
- date of invoice
Where the advice was provided over a period of time rather than on a particular date, it is suggested a date range is stated in place of the ‘date of advice’ referred to above.
My client’s accountant has told our mutual client that she cannot deduct initial financial advice fees. What should I do?
Ideally, use this as an opportunity to communicate with your client’s accountant. If they are unaware of TD 2024/7 they might be pleasantly surprised with the impact, and appreciate being informed.
You might consider sending the accountant the FAAA’s Tax Deductibility of Financial Advice Fees: Accountant’s brief, a two page summary intended for accountant and tax agents, and/or a copy of the tax determination.
Other toolkits and guides - FAAA member access only
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