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  • Legal expenses



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Some legal expenses incurred in gaining or producing your assessable rental income are deductible-such as the cost of evicting a non-paying tenant.

    Most legal expenses, however, are of a capital nature and are therefore not deductible. These include:

    • purchase or disposal of your property
    • costs of resisting land resumption
    • defending your title to the property.

    Non-deductible legal expenses may, however, form part of the cost base of your property for capital gains tax purposes. For more information see the publication Guide to capital gains tax. See also Capital gains tax in this document.

    Example: Legal expenses

    In May 2001, the Johnsons' tenants moved out owing 4 weeks rent. The Johnsons retained the bond money and took the tenants to court to terminate the lease and recover the balance of the rent. The legal expenses incurred for this are fully deductible. The Johnsons were seeking to recover assessable rental income, and they wished to continue earning income from the property. The Johnsons must include the retained bond money and the recovered rent in their assessable income in the year of receipt.

    End of example
    Last modified: 28 Jul 2003QC 16187