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Edited version of your written advice
Authorisation Number: 1051501268689
Date of advice: 1 April 2019
Ruling
Subject: Income tax: deductions: defrauded funds
Question 1
Is the loss of unrecovered defrauded funds deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer 1
Yes. As the loss was necessarily incurred as a direct result of you carrying on a business, the loss is deductible under section 8-1 of the ITAA 1997.
Question 2
Are the legal expenses incurred in recovering the defrauded funds deductible under section 8-1 of the ITAA 1997?
Answer 2
Yes. The legal expenses are deductible under section 8-1 of the ITAA 1997.
This ruling applies for the following period:
Year ending 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
You operate a business.
You engaged a third party to undertake accounting and financial management services, including access to bank accounts for the payment of expenses.
The third party received an email from a person pretending to be you requesting a payment of an amount.
The third party made this payment.
You recovered some amounts.
You have incurred a loss.
You have taken legal action against the third party and have incurred legal expenses in doing so.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1