Private ruling: Deductions for financial services expenses
Date of advice: 12 September 2016
Published: October 2016
Ruling period: Financial year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can I claim a deduction for fees paid to develop and implement an investment plan? | A1: No

Relevant facts and circumstances: You consulted with a financial planner and developed an investment plan. You were charged a fee for the preparation of the advice document (the Fee). The Fee was charged when you decided to proceed with the investment plan.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) broadly allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature. When a taxpayer seeks the advice of an investment adviser in developing an investment plan, a fee is payable for the drawing up or preparation of a plan. A 'management fee' or 'annual retainer' may also be payable if advice is provided over the period of the investment, usually upon an annual or semi-annual review of the performance of the investment. Taxation Determination 95/60 Income tax: are fees paid for obtaining investment advice an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for taxpayers who are not carrying on an investment business? provides the Commissioner's view as to when these fees may be tax deductible. It is the Commissioner's view that a fee charged for drawing up an investment plan is not deductible for income tax purposes. It is not expenditure incurred in the course of gaining or producing the assessable income. This is because it is too early in time to be an expense that is part of the income producing process. The expenditure is to put the income earning investment in place, in the same way as certain kinds of investments attract entry fees. The expenditure is incidental and relevant to outlaying the price of acquiring the investment and is considered capital in nature ( Sun Newspapers v. Federal Commissioner of Taxation 5 ATD 87). On the facts provided by you, the Fee was plan preparation fee and was paid by you prior to putting the investments in place. The outgoing is therefore considered to be capital in nature and is not tax deductible.