Four major professional bodies representing practitioners in the advisory and taxation sectors have released a practical guide on how their members can help clients claim a tax deduction for financial advice fees.
The guidance includes a 38-page document outlining three potential methodologies for apportioning fees, a quick reference guide and some sample invoice templates detailing how the advice can be itemised so the client understands what portion of it is tax deductible.
The Financial Advice Association Australia (FAAA), Chartered Accountants Australia and New Zealand, CPA Australia and Institute of Public Accountants had been working on the guidance since the ATO released Taxation Determination 2024/7 late last year.
Prior to that, the FAAA had been advocating for the ATO to update its guidance on this issue for more than six years.
“Advisers can now support their clients to claim a legitimate tax deduction for financial advice fees with confidence,” FAAA chief executive officer Sarah Abood said.
FAAA policy, advocacy and standards general manager Phil Anderson explained: “We wanted to do this with the accounting bodies because we thought it was really important that we could provide guidance to financial advisers that they would then have the confidence to go and work with the accountants that their clients use.”
While acknowledging it was not an exhaustive list, the three alternative methods to calculate the apportionment of financial advice fees suggested in the guidance include an activity basis, a strategy basis or an insurance premium basis.
“A lot of these are looking for practical ways to solve the problems of apportionment … it’s trying to find a way to simplify a complex process,” Anderson added.
He pointed out although calculating apportionment is complex, a much higher portion of fees is going to be tax deductable under the new regime. In the case of SMSFs, deductibility of advice will be most relevant around advice regarding fund establishments.
