Private ruling: Legal expenses, workers compensation benefits
Date of advice: 30 July 2019
Published: October 2019
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Are you entitled to a deduction for expenses you incurred in a claim against a Relevant Workers Compensation Authority? | A1: Yes. The legal expenses incurred by you were to receive weekly payments worked out under a formula that indirectly relied on amounts you previously earned in your former employment. There is a clear connection between your assessable income and the expense. Accordingly, the legal expenses were incurred in gaining your assessable income and are deductible under Income Tax Assessment Act 1997 (ITAA 1997).

Relevant facts and circumstances: In 20XX you were diagnosed with a cancer related to relevant exposure. Your oncologist advised you to seek legal advice in order to pursue a claim with the Relevant Authority (X), since the exposure was likely related to your work. You engaged the services of a solicitor who confirmed that you were exposed during your time working on a building demolition. The same year, your solicitor lodged a workers compensation claim on your behalf. The following year, the Relevant Authority accepted your claim and fortnightly benefits commenced from your date of diagnosis. The benefits are deemed to be income and tax is deducted from your payments. The benefits include an allowance for your dependant spouse.

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