Private ruling: Deductions - Legal Costs
Date of advice: 9 October 2019
Published: November 2019
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Are the legal expenses relating to employment deductible? | A1: Yes Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent the outgoings are of a capital or private or domestic nature, or relate to the earning of exempt income or non-assessable non-exempt income. A deduction for legal costs where the expenditure is incurred to dispute the receipt of income contractually owed under an employment contract, then the costs are on revenue account and allowable as a deduction.

Relevant facts and circumstances: From XXXX you were employed by your Employer. Your employer sought to redeploy you and issued you with an employment contract. You challenged the redeployment and claimed that the new position was not 'suitable'. You commenced proceedings against your Employer. You sought legal advice. You and your Employer reached agreement on the terms via a legal deed of settlement. Your Employer agreed to pay you. As a consequence you resigned from your employer. You were charged by your legal representatives $XXXX.

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