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Ruling
Subject: Legal expenses
Question
Are you entitled to a deduction for legal expenses?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You terminated your employment.
At the time, you were instructed that you were obliged under the terms of your employment contract that you could not keep copies of emails and correspondence between yourself and your employer relating to your dissatisfaction.
You sought legal advice regarding the interpretation of the employment contract.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 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.
Taxation Ruling TR 2000/5 examines the deductibility of costs incurred in preparing and administering employment agreements. The ruling allows that the costs associated with the settlement of disputes arising from an existing employment agreement, including the cost of representation, are allowable deductions.
In your situation, you incurred costs in obtaining legal advice to interpret a condition under dispute in your existing employment contract. Therefore, you are entitled to a deduction for these legal expenses.