If you’re thinking about engaging an accountant to provide you with some advice or help you with your taxes, you might be wondering whether their fees are tax deductible or not. In many cases, they most certainly are. However, there are some strict rules to follow and the fees may need to be reported differently (depending on their nature).
When it comes to expert advice regarding a small business or medical practice, you cannot beat Curve Accountants. We have a wealth of experience that we’re eager to share with you, so book a free consultation with one of our industry-accredited tax accountants today.
Are Accountant Fees Tax Deductible?
The Australian Taxation Office (ATO) has three golden rules for what they will accept as a valid business deduction:
- The expense must have been for your business; it cannot have been for private use.
- If the expense is for a combination of business and private use, you can only claim the portion that was used for your business.
- You must have records to prove the expense.
Accounting fees (excluding fees for tax preparation) are tax deductible if they’re necessary to your business operations. So, if you had an accountant prepare a financial report that shows your business’s income and expenses, for example, their fees are considered a general expense and are deductible under S8-1 of the Income Tax Assessment Act 1997. They will be reported under the ‘All Other Expenses’ section in your tax return.
What About Tax Accountant Fees?
Accountant fees that relate specifically to tax are also deductible, however, they fall under S25-5 of the Income Tax Assessment Act 1997.
You can claim a deduction for expenses that you incur in managing your business’s tax affairs, including:
- Costs associated with the preparation and lodgment of your tax return and activity statements (such as the purchase of tax software, lodging your return through a registered tax agent, getting tax advice from a recognised tax advisor, and so on).
- Travel costs to receive tax advice (such as the travel costs for attending a meeting with a recognised tax advisor).
- Litigation costs (including court and Administrative Appeals Tribunal fees, as well as solicitor, barrister, and other legal costs).
- Interest charges imposed by the ATO (such as late payment interest, general interest charges, and shortfall interest charges).
- Fees that may be incurred when you pay your tax obligations via card (such as credit and debit card fees for a business tax liability, like GST).
- Costs to comply with your legal obligations for another person’s (or another entity’s) tax affairs.
How Do I Correctly Claim Accountant Fees?
Individuals who aren’t trading as a business will claim under label D10 on their tax return, while individuals who operate as a business or sole trader will claim under label 8. Companies or Trusts will claim under label 6.
If you have received a single invoice for the preparation of your tax return along with the tax returns for any associated people (such as your spouse or child), you will need to split the fees incurred. You must also be able to show how you worked out the fees for each person and keep evidence to support the deduction that you ultimately claim.
What Happens if I Incorrectly Report Accountant Fees?
Claiming accounting fees results in a lower tax liability, meaning that you may not have to pay as much tax at the end of the financial year or you may even receive a tax refund. Incorrect reporting of accountant fees may result in the ATO deeming your expenses as non-deductible, which could mean that you have to pay back additional tax.
Is There a Limit on Accountant Fees as a Tax Deduction?
While there has been some talk over the years of accountant fees being capped at a specific amount per person that is tax deductible in a single financial year, there is currently no limit set. No matter how much you pay for such services, from $500 to $5000, the fee is still deductible.
Do You Need Help in Managing Your Accounting?
If your business would benefit from the assistance of professional accounting, do not hesitate to contact the team at Curve Accountants. We can provide a range of expert business accounting services, from providing tax advice to preparing and lodging your tax return, so rest assured that your business is in good hands when you partner with us.
