Private ruling: Deduction - legal expenses
Date of advice: 4 February 2025
Published: 17 March 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim an income tax deduction for legal fees you incurred? | A1: Yes. Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In your case, you incurred legal expenses to defend allegations of workplace misconduct made against you. These allegations directly related to your daily work duties in which you derive your assessable income. These expenses are characterised as being of a revenue nature and are deductible. Therefore, you will be entitled to a deduction for the legal expenses you incurred under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: You are currently under investigation by your employer for various issues that relate to carrying out your employment duties. You incurred legal expenses in defending the workplace allegations. You are not seeking a redundancy payment, eligible termination payment or another lump sum payment.

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