Private ruling: Expenses for Advocate
Published: November 2013

Ruling: Are you entitled to a deduction for expenses for an Advocate? | Yes. | Year ended 30 June 2012 | Year ended 30 June 2013 | 1 July 2011 | You were employed as a manager. | Allegations of bullying were made against you. | You were suspended on full pay while investigations were held. | You were allowed to have an Advocate, who was not a registered lawyer, represent you at the misconduct investigation. | As a result of the investigation, it was found that you had likely bullied staff members. It was recommended that you not be returned to your position and you were dismissed from employment. | Income Tax Assessment Act 1997 Section 8-1 | Section 8-1 of the Income Tax Assessment Act 1997 provides that a loss or an outgoing is an allowable deduction if it is incurred in producing assessable income or in carrying on a business for the production of assessable income unless that loss or outgoing is capital or of a private or domestic nature. | The courts on a number of occasions have determined legal expenses to be an allowable deduction if the expenses arise out of the day to day activities of the taxpayer's business. The action out of which the legal expense arises has to have more than a peripheral connection to the taxpayer's business and the expense may arise out of litigation concerning the taxpayer's professional conduct. | In FC of T v. Rowe (1995) 31 ATR 392; 95 ATC 4691, an employee incurred legal expenses in defending the manner in which he performed his employment duties. The court accepted that such expenses were allowable and no significance was placed on the taxpayer's status as an employee. | You incurred Advocate expenses in defending allegations of bullying towards staff. In carrying out the actions that led to the allegations, you were executing your employment duties. Consequently, the legal expenses incurred are an allowable deduction.