How to manage the tax on your investments

So you like to dabble in investments. As part of your activities, you incur certain fees. Are you maximising your tax deductions in relation to those costs?

At the outset, you might draw up an investment plan. Sadly, the costs will not be deductible. However, once you're up and running, the ongoing fees typically are deductible.

Why the difference? Well, the Tax Office does not consider the costs of creating an investment plan as deductible expenses for three main reasons:

- They are incurred too early in time to be directly relatable to your assessable income from the investments;

- The expense is associated with putting a possible income-earning investment in place, so the connection (if any) to future income is too tenuous;

- The costs are an outlay to acquire the investment, and so are capital in nature.

The ongoing fees or retainers are typically deductible because costs relating to the "servicing" of an investment portfolio have a "revenue character", since they relate to producing income.

If you obtain advice over the life of an investment portfolio suggesting that changes be made to the make-up of your investments, this would be part and parcel of the management of that portfolio, not the drawing up of a new investment plan. As such, the cost of this advice would also be deductible.

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