Private ruling: Deduction for legal expenses
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the legal fees you incurred? | A1: Yes


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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for a loss or an outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature. Taxation Ruling TR 2000/5 examines the deductibility of costs incurred in preparing and administering employment agreements. The ruling states that certain costs incurred by an employee are an allowable deduction, those costs being: · costs of drawing up an employment agreement with an existing employer · costs of settling disputes arising from an existing employment agreement · costs of changing conditions of an existing employment agreement · costs of renewing or extending a fixed term agreement where there is a provision allowing for renewal or extension In your situation, you paid for a lawyer to look after your interest following the incident. You engaged your lawyer to advise you regarding your position and whether you were treated correctly in the circumstances. It is accepted that you incurred the expense in administering your employment agreement and in order to protect existing rights under the employment agreement. Therefore, you are entitled to a deduction for the legal expenses incurred.

Relevant facts: You were employed and you were assaulted at work by a co-worker. You were injured and hospitalised at the time. You were unable to work and you claimed workers' compensation benefits. At the time your employer suspended you and your co-worker on full pay pending an investigation. | After the incident you were concerned about the possibility of being dismissed from your job through no fault of you own. You engaged a lawyer to assist you and to act on your behalf. | Your co-worker was charged by the police and is to go to Court in the near future, you were not charged. | You have resigned from your job and remain incapacitated from work and you are in receipt of workers' compensation benefits. You stopped using the lawyer at that time. | You incurred legal fees in relation to this matter.