Private ruling: Income tax - deductions - legal fees
Date of advice: 14 January 2020
Published: March 2020
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you able to claim a deduction for legal expenses incurred while defending a bullying and sexual harassment claim in your workplace? | 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 bullying and sexual harassment claim and to avoid possible employment termination.

Relevant facts and circumstances: You are an employee with Company ABC. Your work colleague was being sexually harassed and bullied within the workplace. You tried to intervene on behalf of your work colleague to stop the sexual harassment and bullying. The aggressors of your work colleague then began sexually harassing you by spreading malicious rumours of a sexual nature about your personal, family and work life. You followed the correct channels necessary to stop both the sexual harassment and bullying of your work colleague and also to stop the sexual harassment and bullying toward yourself by the aggressors. The aggressors countered with a bullying claim, where your employer subjected you to disciplinary action and potential termination. You sought legal representation from Solicitor XYZ, who was able to intervene and resolve the communication breakdown between you and your employer. You accepted a reprimand, you were able to avoid termination and the matter was resolved. As a result of legal representation, you incurred a financial loss of $XXXX.

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