| Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011569088730
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Deductibility of legal expenses
Are you entitled to a deduction for legal expenses in relation to seeking reinstatement of your reimbursement of certain domestic expenses, incurred while you are suffering a work-related injury?
No.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts and circumstances
You have a work-related injury and liability has been accepted through a workers' compensation insurer (the insurer).
You make claims to the insurer for certain domestic expenses and they reimburse you.
Earlier this year the insurer ceased liability for these reimbursements and you engaged a lawyer to dispute this decision.
The decision was overturned and liability has been reinstated.
You incurred lawyer's fees.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows you a deduction for all losses and outgoings as long as they are incurred in the course of gaining or producing your assessable income. Where those expenses are of a capital, private or domestic nature, and are not incurred while you are earning your assessable income, they will not be allowed.
In determining whether a deduction for legal expenses is allowable, the nature or character of the expenditure must be considered. That is, it has to be determined whether the legal expenses are incurred in the course of producing your assessable income: the nature or character of the legal expenses follows the benefit that is to be gained by incurring the expenses. For example, if the benefit to be gained is of a private or domestic nature, then the legal expenses incurred in gaining the benefit will also be of a private or domestic nature and will not be deductible.
Taxation Determination TD 93/29, which considers the deductibility of legal expenses, states that where such expenses are incurred by an employee (or a former employee) in pursuing a legal action against their employer (or former employer) to recover amounts owing of a revenue nature such as wages, the legal expenses are an allowable deduction.
In your case, you have a work-related injury and liability had been accepted through a workers' compensation insurer in the form of reimbursement of certain domestic expenses. After the insurer ceased liability you engaged a lawyer to dispute their decision. The decision was overturned and liability has been reinstated.
The benefit you sought in engaging the lawyer was the restoration of the reimbursement of certain domestic costs. When we look at the character of the legal expenses incurred in relation to the reinstatement of these benefits, it can be seen that they are private and domestic in nature. Expenses that are private or domestic in nature are not allowable deductions under section 8-1 of the ITAA 1997.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
