Private ruling: Legal expenses
Date of advice: 12 November 2019
Published: January 2020
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for legal expenses associated with seeking legal advice regarding your response to allegations of misconduct? | A1: Yes. It is accepted that the legal expenses you have incurred directly relate to your income earning activities. They are not private or domestic in nature and are also not capital in nature. Therefore, the legal expenses will be an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Relevant facts and circumstances: In XXXX your employer reviewed allegations made against you of misconduct in the course of your work. You obtained legal representation to assist with defending your conduct. You responded to the allegations of misconduct with the assistance of your legal representation via written correspondence. You began extended leave due to this incident. Your superior forwarded the allegations to an independent investigator. In XXXX the matter was finalised with no sanction imposed. You have since been diagnosed with a medical condition due to the actions of the organisation. You made an application to Comcare in relation to your medical condition. This was accepted on XXXX. This decision was however overturned on the XXXX. You appealed this decision with the Administrative Appeals Tribunal (AAT). The AAT set aside the decision made and determined that you were entitled to compensation . You have confirmed that the compensation you received was the reimbursement of the leave you used after the incident and payment of future medical treatments. No lump sum compensation has been sought or received and you advise you will not seek this in the future. You incurred legal fees.

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