Private ruling: Deduction - legal expenses
Date of advice: 12 November 2024
Published: 13 January 2025
Ruling period: DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: Are you entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for your legal expenses? | A1: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In your case, you incurred legal expenses to defend allegations of workplace misconduct made against you. These allegations directly related to your daily work duties in which you derive your assessable income. These expenses are characterised as being of a revenue nature and are deductible. Therefore, you will be entitled to a deduction for the legal expenses relating to this defence under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: Since the specified date, you have been employed in a variety of public service and private sector roles. On DD MM YY, whilst performing your employment duties, you were placed on an administrative order following allegations of workplace misconduct by two work colleagues. The matter arose because you had some issues with staff and their work performances which you addressed with those persons informally. This led to both of those staff members to make allegations against you of misconduct and harassment, whereby you were placed on an administration order and moved from your position whilst an investigation was undertaken into the allegations. Delays in the investigation meant that you did not receive particulars of the allegations until DD MM YY. The allegations were not proven. However, in the process of protecting your employment and earning an income you incurred legal expenses to defend the false allegations made against you. You engaged a lawyer for general advice in relation to the matter and incurred legal expenses of $XXXX.

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