Private ruling: Income tax: deductions: defrauded funds
Date of advice: 1 April 2019
Published: May 2019
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the loss of unrecovered defrauded funds deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. As the loss was necessarily incurred as a direct result of you carrying on a business, the loss is deductible under section 8-1 of the ITAA 1997. | Q2: Are the legal expenses incurred in recovering the defrauded funds deductible under section 8-1 of the ITAA 1997? | A2: Yes. The legal expenses are deductible under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: You operate a business. You engaged a third party to undertake accounting and financial management services, including access to bank accounts for the payment of expenses. The third party received an email from a person pretending to be you requesting a payment of an amount. The third party made this payment. You recovered some amounts. You have incurred a loss. You have taken legal action against the third party and have incurred legal expenses in doing so.

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