Private ruling: Legal expenses
Date of advice: 2 May 2024
Published: 11 June 2024
Ruling period: Year ended 30 June 2022 | Year ended 30 June 2023 | Year ending 30 June 2024
Date scheme commenced: 1 July 2021

Ruling: Q1: Are you entitled to a deduction for your legal expenses? | A1: Yes. Based on the information provided to the Commissioner your legal expenses have the relevant connection to your income earning activity and they are therefore deductible under Section 8-1 of the Income Tax Assessment Act 1997 .

Relevant facts and circumstances: You were employed with Employer Z. A few years ago, an official organisation issued you with a notice stating that you were under investigation for allegations of inappropriate conduct concerning the manner in which you performed your employment duties. The notice required that you attend a compulsory interview with Investigators. You sought legal advice in relation to this matter. You complied with the Notice and attended the compulsory interview. A few months after the interview, the organisation wrote to you to advise you that they made no finding of inappropriate conduct or serious misconduct (related to the allegations associated with the manner in which you performed your official duties) and that they would be taking no further action in this matter. The organisation further advised you that other allegations had been raised with them that did not give rise to a suspicion of inappropriate conduct and that these would be referred to another organisation for consideration as to what action, if any, should be taken. No further action was undertaken in these matters until a number of months later. You were advised that the second organisation had engaged an independent investigator to undertake an investigation into allegations raised related to the manner in which you performed your employment duties. A few months after the new investigation began, you were advised in a letter that the external investigator proposed to conduct an interview with you. The external investigator provided you with an opportunity to make a written submission to them in response to the allegations in advance of any interview. You sought legal advice regarding the written response you provided to address the allegations put to them. Over a period of several months, you separately submitted your responses to each of the allegations with advice obtained from your legal representatives. You incurred legal expenses to defend your employment. You have no legal recourse to claim your expenses from the employer. You have paid the legal expenses in full. The investigation concluded that no further action (including disciplinary action) would be taken against you.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1