1012793992551 | Legal database

Disclaimer
This edited version has been archived due to the length of time since original publication.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 your written advice

Authorisation Number: 1012793992551

Ruling

Subject: Legal expenses

Question

Are you entitled to a deduction for your legal expenses in the income year in which the invoice is raised?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on

1 July 2013

Relevant facts and circumstances

You are an employee.

You were subject to a workplace dispute.

You were unable to resolve the matter through the organisation you worked for, so you took the matter to an independent body

You were concerned about the possibility of being dismissed as a result of the complaint, so you sought legal advice.

You have incurred legal expenses.

The workplace dispute is no longer an issue.

You continue to work at the same organisation.

You have not received any payment in relation to the matter.

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 a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

In determining whether a deduction for legal expenses is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered. The nature or character of the legal expense follows the advantage that is sought to be gained by incurring the expenses.

In your case you were subject to a workplace dispute. You were unable to settle the dispute with the organisation you worked for, so you took the matter to an independent body. Concerned about the possibility of being dismissed from your position as a result of your complaint, you sought legal advice. The legal action taken relates to your employment conditions and the implementation of workplace policies.

It is considered that the dispute is sufficiently connected to your income earing activities as an employee and is not capital or private in nature. While you were not directly defending the way in which you performed your duties, you were seeking to restore the conditions and safe environment of your workplace and protect your employment.

Accordingly, you are entitled to a deduction under section 8-1 of the ITAA 1997 for your legal expenses in the year of income in which the invoices are raised.

Copyright notice

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).