When it comes to tax, most Australians are keen to claim every legitimate deduction they can — but financial advice has always been a bit of a grey area. Now, the Australian Taxation Office (ATO) has provided fresh guidance on exactly which types of advice can be written off, and which can’t.
ATO Clarifies Tax Deductions on Financial Advice
The ATO has confirmed that certain financial advice fees may now qualify as tax deductions, depending on the purpose and timing of the advice. Specifically, advice related to managing existing investments — such as shares or managed funds — can be claimed as a deduction.
However, fees paid for initial financial advice, which is typically used to create a brand-new investment strategy or portfolio, are not deductible. The difference lies in whether the advice helps you earn assessable income or simply sets up the means to do so later.
That might sound like a technical distinction, but it’s an important one. Ongoing advice and portfolio management — which generate income over time — are viewed as part of earning taxable income. On the other hand, setting up a financial plan is considered a private expense.
What the ATO Says You Can and Can’t Claim
The tax office outlined that Australians can generally claim deductions for advice costs directly connected to earning investment income, explains Yahoo Finance. That includes fees for monitoring or adjusting existing portfolios, reviewing performance, or rebalancing assets.
However, Australians cannot claim costs related to establishing a superannuation fund, buying insurance, or paying for general budgeting services. Those fall under personal financial management, not income generation.
Financial advisers say this clarification from the ATO will help investors make smarter, more compliant decisions come tax time. Still, the onus remains on individuals to keep detailed records of invoices and reports that clearly show the nature of the service provided.
A Welcome Win for Savvy Investors
For Australians who regularly seek professional advice, this new guidance could mean meaningful savings. With investment markets still volatile, more people are turning to advisers to fine-tune their strategies — and being able to deduct some of those costs makes the process more appealing.
Tax experts recommend discussing any claims with a licensed accountant before lodging a return to ensure the deductions meet ATO criteria. Incorrect claims can lead to delays or even penalties.
The change highlights a growing effort by the ATO to provide clarity in areas where the rules have been fuzzy. For many taxpayers, that transparency could make the difference between uncertainty and confidence this financial year.
