Private ruling: Legal expenses
Published: April 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to claim a deduction for legal expenses relating to an employment contract dispute? | A1: Yes.

Relevant facts and circumstances: You were employed under an employment contract. Your employment contract set out the terms your working conditions. These working conditions were varied by your employer without consultation with you. You sought legal advice and assistance to return your working conditions to those specified in your employment contract.

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 legal advice and assistance to return your working conditions to those agreed to in your employment contract. 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 these legal expenses.