Hi Anna

I have not come across Freedom Property but am aware of other providers offering a similar offer.

My view is that the normal industry view is that it should be treated as a capital cost on the basis that it is a cost to purchase an investment. If they had multiple properties and this was an annual fee to manage / advise on the properties then this could be a deductible expense.

I know it has been argued that an annual investment membership fee should be deductible and that it is probably why it has been structured that way.

Taxation determination TD 95/60 - "Income tax: are fees paid for obtaining investment advice an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for taxpayers who are not carrying on an investment business?" may assist you.

Paragraph 3 & 4 states:

"3. In view of the above, we do not think that the fee for drawing up the plan is deductible for income tax purposes. This is because it is not expenditure incurred in the course of gaining or producing the assessable income from the investment(s). It is too early in time to be an expense that is part of the income producing process. It is an expense that is associated with putting the income earning investment(s) in place, in the same way as certain kinds of investments attract entry fees, and has, therefore, an insufficient connection with earning income from the investment(s). See F C of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 and the discussion of that case by Hill J in Cooper, (supra) at ATC 4412, ATR 1635.

4. Expenditure on drawing up the plan is incidental and relevant to outlaying the price of acquiring the investment(s) , and is so associated with the making of the investment(s) as to warrant the conclusion that it is capital or capital in nature: see Sun Newspapers v. Federal Commissioner of Taxation 5 ATD 87 per Dixon J especially at ATD 95. The expenditure may qualify as an incidental cost to the taxpayer of the acquisition of the assets(s) [i.e., the investment(s)] for capital gains tax purposes. See subsection 110-25(3) and section 110-35 of the ITAA 1997."

Paragraph 7 states:

"In our view, a fee paid to an investment adviser to draw up an investment plan in these circumstances would be a capital outlay even if some or all of the pre-existing investments were maintained as part of the plan. This is because the fee is for advice that relates to drawing up an investment plan. The character of the outgoing is not altered because the existing investments fit in with the plan. It is still an outgoing of capital for the same reasons as set out in paragraphs 3 and 4 above."

If other members have a view please let the forum know.

Thanks

SMSF AAA