Private ruling: Legal Fees
Date of advice: 7 November 2017
Published: March 2018
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for legal expenses? | A1: Yes

Relevant facts and circumstances: You are employed in a particular profession. You were suspended from duty in March 201X for an alleged breach of conduct. Your employer started an investigation and was carried out over several months. The investigation concluded as there was no substantial evidence to prove there was a breach of conduct. You were transferred to a different worksite. You engaged a legal representative in December 201X and incurred fees.

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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for a loss or an outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature. For legal expenses to constitute an allowable deduction, it must be shown that they were incidental or relevant to the production of your assessable income. Also, in determining whether a deduction for legal expenses is allowable, the nature of the expenditure must be considered. The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. In your case, it is accepted that you were required to defend the way in which you discharged your employment duties. Consequently you are entitled to a deduction for legal expenses relating to this defence.