Private ruling: Legal expenses
Date of advice: 20 April 2018
Published: July 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to a deduction for the legal expenses you incurred to obtain an additional payment for long service leave from your former employer? | A1: Yes. Where legal expenses are incurred in pursuing an amount of assessable income which is owed, such as salary and wages, those legal expenses are directly incurred in the process of deriving assessable income and are therefore deductible under section 8-1 of the ITAA 1997 (Taxation Determination TD 93/29.) The legal expenses are deductible in the income years that they are incurred.

Relevant facts and circumstances: After your employment terminated, you were in dispute with your former employer regarding the amount of the payment you received for your unpaid employee entitlements. You commenced legal proceedings against your former employer. Without admission of liability, you and your former employer agreed to settle the proceedings and entered into a Deed, under which your former employer was to pay you an amount which would be taxed. You received payment. You will declare the payment in your tax return. You incurred legal fees in relation to the proceedings.

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