Private ruling: Deduction
Date of advice: 21 October 2025
Published: 8 December 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a portion of the legal fees incurred to administer your tax obligations with amending your tax returns? | A1: Yes. | Q2: Are you entitled to a portion of the legal fees incurred in relation to your other tax obligations? | A2: No.

Relevant facts and circumstances: You underwent a review by the Australian Taxation Office (ATO). The ATO found that you had not complied with the requirements of the relevant Act. The review resulted in you being required to amend prior year tax assessments for yourself as well as administrative penalties being applied to your tax account. You engaged a legal firm to assist you throughout the ATO review process. You engaged lawyers to assist you with your case and sought their advice regarding objections and avenues to appeal the assessments and penalties. The legal firm worked through the issues involved in your case and then engaged with the ATO and represented him during the process. You have incurred legal expenses in relation to the ATO review.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-5

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (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. Section 25-5 of the Income tax Assessment Act 1997 (ITAA 1997) allows deductions for certain tax compliance expenditure. Subsection 25-5(1) allows deductions to the extent that the entity incurred expenditure for a) managing their tax affairs, or b) complying with an obligation imposed on them by a Commonwealth law, insofar as it relates to the tax affairs of an entity. Sub section 25-5(2) states that you cannot deduct under subsection (1): d) expenditure for a matter relating to the commission (or possible commission) of an offence against an Australian law or a foreign law; This means you are entitled to a deduction for the portion of the legal fees that relates to the amending of your tax returns, and you cannot claim as a deduction the portion of the legal fees that relate to your self-managed super fund penalties.