Financial advisers have traditionally received commissions for the advice they give to establish and manage personal income protection policies. By way of an example, for a client income protection premium of $5,000, advisers receive commissions, $3,000 upfront to establish and $1,000 ongoing to manage the policy. In this case, the client is able to claim a tax deduction for the full $5,000 income protection premium which includes the commission payment to the adviser.
For an adviser who charges a fee for service rather than receiving a commission - the premiums for the same income protection policy as above without commissions would be $3,500. The adviser would charge an advice fee of $3,000 to establish the policy and $1,000 ongoing.
My question is are the advice fees associated with (1) the establishment and (2) the ongoing management of a personal income protection policy tax deductable.
