Wealth creation and financial planning is becoming more popular for investors. The fees paid to a financial planner are deductible when it is paid for ongoing monitoring of a portfolio earning interest or dividends. However, the ATO considers the initial fee paid to a financial planner for drawing up an investment plan is not deductible.
This is the case even if that investment plan includes some existing investments that you own. They consider the fees to be capital in nature, they are a precursor to the event of earning any investment income, ie. the too soon rule! A further word of caution on the deductibility of fees is amounts paid to investment intermediaries. Some of these intermediaries provide a complete service and charge a brokerage fee, for want of a better word, to investors.
For this fee they will organise a rental property which not only includes sourcing the property, but also new blocks of land and the builder. They also source the finance, the Quantity Surveyor’s report to the Capital Allowance claim, and the accountants to prepare the PAYG Withholding Variation Application with the ATO. Usually the fee is a lump sum fee. As the fee represents different work and is sometimes contracted to outside parties, the entire fee is not an outright deduction. This may mean the investor needs to obtain a breakdown of the fee from the “broker”.
The fee to organise/source the rental property is capital and would form part of the second element cost base of the asset, as it is an incidental cost to acquiring the asset. The fee paid for organising the finance could be deductible as a mortgage brokerage cost. If the total mortgage broker’s cost for the year is less than $100 then it is deductible in the year incurred but, if more than $100, then it is deductible over the term of the loan or five years, whichever is the shorter. The fees paid directly to the Quantity Surveyor should be deductible as this is a cost to assist in calculating the investment deductions. The PAYG Variation Application fees should also be deductible.
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Article from www.taxreporter.com.au