Private ruling: Investment expenses
Published: September 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for fees paid to your financial advisor? | A1: Yes.

Relevant facts and circumstances: You paid a fee to your financial advisor. You are not carrying on a business of investing. The fee was paid for advice to restructure your current investments. You main source of income is from your investments.

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) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Taxation Determination TD 95/60 deals with the issue of whether fees paid for obtaining investment advice are an allowable deduction for taxpayers who are not carrying on an investment business. TD 95/60 explains that a fee for drawing up a financial plan is not deductible because it is not expenditure incurred in the course of gaining or producing the assessable income from the investments. It is too early in time to be an expense that is part of the income producing process as it is an expense that is associated with putting the income earning investments in place. Taxation Ruling IT 39 deals with expenditure incurred in servicing an investment portfolio. It explains that expenses to service a portfolio are incurred in relation to the management of income producing investments and have a revenue character. However, to be wholly deductible, all of the fee must relate to gaining or producing assessable income. If the advice covers other matters or relates in part to investments that do not produce assess income, only a portion of the fee is deductible. Paragraph 6 of TD 95/60 states that: Over the period of an investment plan advice may be received suggesting changes be made to the mix of investments held. This would normally be part and parcel of managing the investments in accordance with the plan. This advice may be from the original investment adviser or from a new adviser. Provided the advice is not in relation to drawing up an investment plan it will be an allowable deduction... In your case, you paid a fee to a financial advisor to restructure your current investments. This fee is considered to be incurred to manage your investment portfolio. Therefore, you are entitled to a deduction for the fee under section 8-1 of the ITAA 1997.

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