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Edited version of private advice

Authorisation Number: 1052407242744

Date of advice: 16 June 2025

Ruling

Subject: Deductions - legal fees

Question 1

Are you entitled to a deduction for your legal expenses?

Answer 1

Yes.

You incurred legal expenses for representation in a dispute while employed and in seeking entitlements of a revenue nature once it was determined that your employment could not continue. Hence the legal expenses incurred are deductible, because they are not capital in nature.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were employed by Company A.

You engaged legal practitioners to assist in responding to allegations made by Company A and to assist in settlement of all outstanding entitlements less all applicable taxes as follows:

•                unpaid salary entitlements (including superannuation entitlements) up to and including the resignation date

•                three (3) months of the employee's salary (inclusive of superannuation entitlements) in lieu of the employee's notice period pursuant to the Employment Agreement

•                a lump sum payment equivalent to three (3) months of lease payments in respect of the Employee's novated vehicle;

•                all accrued but unused annual leave up to and including the resignation date; and

•                an ex-gratia payment

Your action resulted in a Deed of Release dated and signed XX August 20XX and payment of the above entitlements. You resigned as part of the settlement.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

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