Private ruling: Legal expenses
Date of advice: 26 November 2019
Published: February 2020
Ruling period: Income year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Can you deduct the cost of legal fees incurred when responding to legal action taken to defend decisions you made? | A1: Yes. Having considered your circumstances, it is accepted that you incurred legal expenses defending decisions you made. Therefore, the expenses you incurred in relation to this matter are deductible under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: In your occupation you made decisions relating to disciplinary action towards people which involved suspending them. Your employer has found that you were doing your job. Legal action was instigated against you by those who were involved in the disciplinary action. You have incurred legal expenses in defending your decisions relating to the disciplinary action. There was a trial concerning your position and the decisions you made to suspend the people. The trial was for you to defend your decisions. Part of this trial related to your claim for damages. You are aware you cannot claim a deduction for the legal expenses you incurred in relation to this matter. You have calculated the expenses which relate to defending your decisions as $X.

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