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ATO release draft determination on deductibility of financial advice fees

Article published on: 13-12-2023

The ATO has released for comment Draft Taxation Determination TD 2023/D4. This determination sets out the ATO’s view regarding the deductibility of financial advice fees under sections 8-1 or 25-5 of the Income Tax Assessment Act (ITAA) 1997. There is no change in the ATO’s view. The TD specifically excludes adviser fees paid by superannuation funds.

TD 2023/D4 will replace TD 95/60 which has been withdrawn. The public is invited to comment on draft TD 2023/D4 by 2 February 2024 prior to finalisation. The finalised TD will apply to income years before and after its date of issue.

When are advice fees deductible?

Fees are deductible where the expense relates to producing the client’s assessable income and is paid by the client to the adviser (s. 8-1). Fees are also deductible where the client pays a fee for advice about managing their tax affairs which must be provided by a recognised tax adviser (s 25-5).

When are advice fees not deductible?

Fees are not deductible where the expense is capital or domestic in nature, for example, advice provided in relation to the client’s household budgeting or for financial advice on a proposed investment. Furthermore, upfront advice fees are generally capital in nature and not deductible.

Apportionment of fees

Deductions allowed under both s8-1 and s 25-5 can only be deducted once. Where the fee is charged and the advice relates to producing assessable income and other purposes, the fee is not fully deductible. The deductible amount should be apportioned on a fair and reasonable basis. The client should evidence their method of apportionment, otherwise the fee cannot be deducted.

A financial adviser can provide an itemised invoice, a fee disclosure statement or an advice fee consent form with the:

name of the financial adviser
expense amount
explanation of the 2advice provided
date the expense was incurred, and
date of invoice.

Further information

For more information on the current ATO view and what adviser fees are generally deductible, see our article Deductibility of Financial Planning Fees.

This communication is prepared by Actuate Alliance Services Pty (ABN 40 083 233 925, AFSL 240959), a related entity of MLC Wealth Limited (ABN 97 071 514 264). This is for financial adviser use only – it is not to be distributed to clients. The communication has been prepared to provide financial advisers with technical resources, support and knowledge. The information in this document is current as at the date of publication and reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue, and may subject to change. In some cases, the information has been provided to us by third parties. Whilst care has been taken in preparing this document, no liability is accepted for any errors or omissions in this document, and loss or liability arising from any reliance on this document. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we therefore recommend your client consult with a registered tax agent.