Private ruling: Deductions - legal expenses
Date of advice: 25 July 2025
Published: 29 September 2025
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim a deduction for your legal expenses incurred in dispute with your employer? | A1: Yes. Section 8-1 of the ITAA 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. For legal expenses to constitute an allowable deduction, it must be shown that they are incidental or relevant to the production of assessable income or business operations. The nature of the expense must also be considered. The nature or character of legal expenses follows the advantage that is being sought by incurring the expenses.

Relevant facts and circumstances: On XXX the taxpayer (TP) commenced employment with the employer. In XXX the employer announced by XXX it was mandatory for all staff to comply with COVID vaccination. The TP had been undergoing long term fertility treatment. On medical advice from the medical treating team, the TP advised the employer of the possible medical complications in the event of undergoing vaccination and the long-term impacts on the TP's fertility treatment. The TP was granted temporary medical exemptions from XXX to XXX and the employer arranged a temporary secondment starting on XXX enabling remote working arrangements. The TP continued to work from home and continued with fertility treatment. Another exemption from XXX to XXX was granted by the employer and then withdrawn, causing the TP significant mental stress and anxiety, sufficient to seek medical advice and obtain a Workers Compensation medical certificate on XXX. On XXX the employer acknowledged the TP may not be able to be fully vaccinated on or before XXX. Accordingly, they advised should this situation arise, the TP will be on unpaid leave until they are able to comply with the site access requirement. The TP obtained Legal Representation from solicitors to mediate the situation and advocate for them. On XXX the TP had surgery. On XXX the TP received advice from the employer that unpaid leave was the only option, and the TP was denied being able to take sick or annual leave. Paid leave was not an option. The employer advised the TP was expected back at work XXX and as confirmation of receiving the vaccination was not provided, the TP was unable to meet the site access requirements. As such, a further unpaid leave will be approved to cover their current absence until XXX. On X different dates the TP's solicitor's sent emails to the employer explaining as the secondment finished on XXX, the TP should return to their substantive role. As this has not happened, the TP was not being paid correctly and their leave accrual and balances were impacted. The employer's self-insurer denied workplace injury had occurred, and the solicitor sent a "Natural Justice" letter to the self-insurer. On XXX the solicitor prepared a submission to the self-insurer in support of a Workers Compensation claim and the employer started paying the TP again at correct rates for their substantive role as mine supervisor. On XXX the self-insurer rejected the TP's claim for Workers Compensation for psychiatric injury. On XXX the employer issued a requirement to have Covid 19 vaccination, effective XXX. However, the TP has a medical certificate saying the TP is unfit for work until XXX. The employer directed the TP to undergo an independent medical assessment to determine fitness for return to work. On XXX the TP attended a medical examination with a doctor who provided a report on the TP's ability to perform the role. The doctor found the TP is unable to return to their substantive role as XX supervisor. Based on their doctor's findings, on XXX the employer considered termination. They issued a "Show Cause" notice to the TP on XXX. On XXX the TP's solicitor responded to the "Show Cause" notice suggesting that there were alternative employment roles within the company which may be suitable for the TP and that the employer is legally unable to terminate until 12 months date of workplace injury. On XXX the employer issued a notice of immediate Termination of Employment. The solicitor responded stating unlawful termination date which must be no earlier than XXX. The solicitor also contended that leave balances were incorrect. On XXX the employer withdrew termination and confirmed a new termination date of XXX. On XXX the employer advised the Workers Compensation claim had been approved. On XXX the solicitor drafted a letter to the employer arguing that leave entitlements were still incorrect, and additionally, confirming eligibility to annual bonus and the Employee Share Plan. On XXX the employer inform the TP was to be assessed by an independent medical examiner, a psychiatrist. On XXX the TP's employment was terminated. On XXX the solicitor sent a number of emails to the employer regarding the ongoing situation where the TP has still not been paid correctly. No "Deed of Settlement" was received, and the TP was finally paid leave balances. The TP incurred and paid the solicitor's invoices totalling $XX during this period. There were a total of X invoices.

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