Private ruling: Deductibility of legal expenses incurred
Date of advice: 25 May 2020
Published: June 2020
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you entitled to claim legal expenses incurred in defending a matter that originated at your former workplace for the financial year ending 20XX? | 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. Based on the facts you have provided, we can conclude that the legal expenses incurred in lodging a Fair Work Commission order to Stop bullying and harassment whilst you were employed and performing your income producing activities were as a result of you seeking advice regarding safe environment to carry out your employment duties. Accordingly, you are entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses you incurred to defend your actions in your workplace | Q2: Are you entitled to claim legal expenses incurred in defending a matter that originated at your former workplace for the financial year ending 20XX? | A2: 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. Based on the facts you have provided, we can conclude that the legal expenses incurred in lodging a Fair Work Commission order to Stop bullying and harassment whilst you were employed and performing your income producing activities were as a result of you seeking advice regarding safe environment to carry out your employment duties. Accordingly, you are entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses you incurred to defend your actions in your workplace Further information regarding "Deductions and Expenses: Legal expenses in course of employment" is addressed in ATO interpretive Decision ATO ID 2001/27.

Relevant facts and circumstances: You were employed as a fulltime employee with company X. Your role with company X was Y. You experienced incidents of bullying and harassment in the workplace. You engaged lawyers in relation to those incidents and lodged a formal complaint. You took leave from work as a result of the incidents and your health. You incurred legal expenses in relation to those incidents during the 20XX and 20XX financial years.

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