Private ruling: Deductions - legal expenses
Date of advice: 22 November 2024
Published: 13 January 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you deduct the legal expenses you incurred when you sought representation for your employers claim of an overpayment of salary and wages under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: On XX XX 20XX, you commenced employment with an Employer (the Employer). You were employed on a full-time basis. On XX XX 20XX, the Employer claims that your employment was terminated, with an effective date of XX XX 20XX. On XX XX 20XX, the Employer emailed you outlining the procedure for the retrieval of wages that the Employer alleges they overpaid in the amount of $X,XXX. Payslips were issued to you. The letter you received on XX XX 20XX, communicated to you for the first time, in writing, that your employment had been terminated. You consider that your employment was terminated as at this date and not the earlier date 'purported' by the Employer. On XX XX 20XX, the Employer emailed you explaining your employment had been terminated during the office meeting on XX XX 20XX, advising that you then owed $X,XXX in overpayments. On XX XX 20XX, the Employer filed a claim (the Claim) in the Court. The Employer claimed that you owed an amount of $X,XXX in salary and wages; in addition to the filing fee amounting to $XXX.XX. On XX XX 20XX, you received a copy of the Claim lodged by the Employer in Court. On XX XX 20XX, your solicitors provided professional advice regarding payslips, the overpayment and an unfair dismissal case. Your solicitor's advice covered financial matters (including wages, payslips and overpayment), unfair employment termination and the Court mediation process. On XX XX 20XX, your solicitors issued a letter to the Employer with an offer to settle the dispute. On XX XX 20XX, your solicitors lodged a Response in Court. You received tax invoices from your solicitors in the amount of $XX,XXX. The tax invoices were issued to you. On XX XX 20XX, you entered into a Deed of Settlement with the Employer. On XX XX 20XX, the Employer withdrew the Court application. You retained all salary and wages payments received during the period in dispute and evidenced on the payslips.

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