Private ruling: Legal expenses – appealing decision, demotion of work position
Date of advice: 12 February 2019
Published: May 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Are the legal expenses incurred for challenging a demotion in your employment an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. You incurred these expenses by taking legal action against your employer for reinstatement of your former position. The legal expenses 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 ITAA 1997.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Your employment ended after an investigation found you guilty of breaching policy. A decision was made by the general manager to demote you into a position that resulted in a loss of status and financial increments. After liaising with outside agencies you were advised that it was in your best interest to appeal the decision and you hired a legal firm. The legal firm on your behalf appealed the decision. Your employer did not agree that your matter met the guidelines to be referred to an external party. The matter was finalised with no change to your working status. You still currently work in your demoted position.

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