Private ruling: Legal expenses
Date of advice: 31 October 2019
Published: January 2020
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Are your legal expenses deductible? | A1: Yes. Your legal expenses are deductible as your legal action was in relation to claims for items of a revenue nature rather than a capital nature as per Taxation Determination TD 93/29 and Romanin v. Commissioner of Taxation [2008] FCA 1532; 2008 ATC 20-055; (2008) 73 ATR 760.

Relevant facts and circumstances: After termination of your employment you instructed your solicitors to prepare a claim against your former employer and issue a writ and statement of claim. In your statement of claim, you contended that no written contract of employment applied to your employment and that your contract of employment was partly oral and partly implied. In particular, you claimed that to the extent that the employment contract was implied, it included terms requiring the employer to provide you a reasonable period of notice of termination or payment in lieu of such notice. In your statement of claim, you made claims for a payment in lieu of notice and a performance bonus which you believed that you were owed. Subsequently you signed a deed of settlement and release in return for the gross amount of $XX,XXX. Your former employer withheld tax from the settlement payment. You incurred $XX,XXX in legal fees in relation to the legal action.

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