Is Financial Advice Tax Deductible?

Could you now claim a tax deduction on financial advice? 

Recent changes in legislation have introduced a meaningful shift for Australians seeking financial advice. For the first time, eligible individuals may be able to claim a tax deduction on some or all of their upfront financial advice fees. 

This change has the potential to make financial advice more affordable and accessible, particularly as more individuals seek guidance on complex superannuation and investment strategies. 

What’s changed? 

Traditionally, only ongoing financial advice related to managing existing investments could be claimed as a tax deduction. However, legislation now allows individuals to potentially deduct the full or partial cost of initial (upfront) advice, where it relates to the management of their tax affairs or eligible financial products. 

This includes: 

• The development of a financial plan 

• Personal retirement planning 

• Investment strategy formation 

• Risk insurance and superannuation advice 

It’s a positive shift that recognises the long-term value of financial planning in managing wealth, mitigating risk, and preparing for retirement. 

Why this matters now 

There are a number of reasons individuals may be seeking financial advice: 

• Impending Division 296 superannuation changes: The proposed tax for individuals with over $3 million in super is creating a need for strategic reviews and potentially significant structural changes. 

• Transition to retirement and pension planning: Many Australians are looking to solidify their income strategies as they approach retirement. 

• Intergenerational wealth transfers and estate planning: With more families planning for the next generation, advice on gifting, trusts and tax effectiveness is in demand. 

• Changing personal or business circumstances: A growing business, a property transaction, or a family event can all trigger the need for professional financial guidance. 

Example scenarios 

To help you understand how this change could work in practice, here are a few common examples: 

1. Superannuation Strategy Review (Division 296)

John has $3.5 million in super and is concerned about the impact of the proposed Division 296 tax. He engages a Morrows financial adviser for a comprehensive review and receives a tailored plan involving contributions, withdrawals, and alternative structures. The upfront advice fee may now be deductible, reducing the overall cost of this essential review. 

2. Retirement Planning

Susan is 58 and considering retiring within the next five years. She wants a detailed retirement plan to understand her income needs, investment strategy, and how long her money will last. The financial advice she receives on her superannuation drawdown and income streams may be eligible for a tax deduction. 

3. Business Exit Strategy

David is preparing to sell his business and needs advice on how to structure the proceeds to fund his retirement. His adviser develops a comprehensive financial strategy that incorporates investments, superannuation, and tax planning. The initial cost of this financial advice may be deductible. 

Speak to your Morrows advisor 

This is a welcome move for individuals who have been undecided about seeking advice or who need to reassess their financial plans in light of new legislation or life changes. 

As with all tax-related matters, eligibility will depend on your circumstances and the nature of the advice received. We strongly encourage you to speak with your Morrows advisor. 

Looking to make the most of your financial advice?
We can help you determine whether your advice qualifies for a full or partial deduction and guide you through the process.