Private ruling: Legal expenses
Date of advice: 8 December 2021
Published: March 2022
Ruling period: Year ending 30 June 20XX | Year ending 20 June 20XX
Date scheme commenced: 3 February 20XX

Ruling: Q1: Are you able to claim a deduction for legal expenses incurred while defending a claim of professional negligence against you ? | A1: Yes. Section 8-1 of the Income Tax Assessment Act 1997 allows for a deduction for a loss or outgoing to the extent that it is incurred in gaining or producing your assessable income. Accordingly, you are entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses you incurred in defending a claim of professional negligence against you while instructing as a personal trainer.

Relevant facts and circumstances: You were contracted as sole trader for a business to run fitness classes. And incident occurred during a fitness class that you were instructing by a member of the class. As a result, the member of the fitness class brought a civil lawsuit against yourself and the owners of the business claiming professional negligence. You sort legal advice from a law firm and were charged a total of $XX,XXX Between X/X/20XX and XX/XX/20XX for legal representation, advice, and court costs.

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