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Edited version of private advice
Authorisation Number: 1051556963086
Date of advice: 30 July 2019
Ruling
Subject: Legal expenses, workers compensation benefits
Question
Are you entitled to a deduction for expenses you incurred in a claim against a Relevant Workers Compensation Authority?
Answer
Yes. The legal expenses incurred by you were to receive weekly payments worked out under a formula that indirectly relied on amounts you previously earned in your former employment. There is a clear connection between your assessable income and the expense.
Accordingly, the legal expenses were incurred in gaining your assessable income and are deductible under Income Tax Assessment Act 1997 (ITAA 1997).
This ruling applies for the following period:
Year ended 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
In 20XX you were diagnosed with a cancer related to relevant exposure.
Your oncologist advised you to seek legal advice in order to pursue a claim with the Relevant Authority (X), since the exposure was likely related to your work.
You engaged the services of a solicitor who confirmed that you were exposed during your time working on a building demolition.
The same year, your solicitor lodged a workers compensation claim on your behalf.
The following year, the Relevant Authority accepted your claim and fortnightly benefits commenced from your date of diagnosis. The benefits are deemed to be income and tax is deducted from your payments. The benefits include an allowance for your dependant spouse.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1