| Disclaimer This edited version has been archived due to the length of time since original publication.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 private ruling
Authorisation Number: 1012538749749
Ruling
Subject: Deduction for legal expenses
Question
Are you entitled to a deduction for the legal fees you incurred?
Answer
Yes
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts
You were employed and you were assaulted at work by a co-worker. You were injured and hospitalised at the time. You were unable to work and you claimed workers' compensation benefits. At the time your employer suspended you and your co-worker on full pay pending an investigation.
After the incident you were concerned about the possibility of being dismissed from your job through no fault of you own. You engaged a lawyer to assist you and to act on your behalf.
Your co-worker was charged by the police and is to go to Court in the near future, you were not charged.
You have resigned from your job and remain incapacitated from work and you are in receipt of workers' compensation benefits. You stopped using the lawyer at that time.
You incurred legal fees in relation to this 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 allows a deduction for a loss or an outgoing to the extent to which it is incurred in gaining or producing assessable income, except where the loss or outgoing is of a capital, private or domestic nature.
Taxation Ruling TR 2000/5 examines the deductibility of costs incurred in preparing and administering employment agreements.
The ruling states that certain costs incurred by an employee are an allowable deduction, those costs being:
· costs of drawing up an employment agreement with an existing employer
· costs of settling disputes arising from an existing employment agreement
· costs of changing conditions of an existing employment agreement
· costs of renewing or extending a fixed term agreement where there is a provision allowing for renewal or extension
In your situation, you paid for a lawyer to look after your interest following the incident. You engaged your lawyer to advise you regarding your position and whether you were treated correctly in the circumstances.
It is accepted that you incurred the expense in administering your employment agreement and in order to protect existing rights under the employment agreement. Therefore, you are entitled to a deduction for the legal expenses incurred.