Private ruling: Deductions - legal fees
Date of advice: 16 June 2025
Published: 11 August 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for your legal expenses? | A1: Yes. You incurred legal expenses for representation in a dispute while employed and in seeking entitlements of a revenue nature once it was determined that your employment could not continue. Hence the legal expenses incurred are deductible, because they are not capital in nature.

Relevant facts and circumstances: You were employed by Company A. You engaged legal practitioners to assist in responding to allegations made by Company A and to assist in settlement of all outstanding entitlements less all applicable taxes as follows: • unpaid salary entitlements (including superannuation entitlements) up to and including the resignation date • three (3) months of the employee's salary (inclusive of superannuation entitlements) in lieu of the employee's notice period pursuant to the Employment Agreement • a lump sum payment equivalent to three (3) months of lease payments in respect of the Employee's novated vehicle; • all accrued but unused annual leave up to and including the resignation date; and • an ex-gratia payment Your action resulted in a Deed of Release dated and signed XX August 20XX and payment of the above entitlements. You resigned as part of the settlement.

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