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Edited version of private advice
Authorisation Number: 1051592283861
Date of advice: 9 October 2019
Ruling
Subject: Deductions - Legal Costs
Question
Are the legal expenses relating to employment deductible?
Answer
Yes
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent the outgoings are of a capital or private or domestic nature, or relate to the earning of exempt income or non-assessable non-exempt income.
A deduction for legal costs where the expenditure is incurred to dispute the receipt of income contractually owed under an employment contract, then the costs are on revenue account and allowable as a deduction.
This ruling applies for the following period:
Year ended 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
From XXXX you were employed by your Employer.
Your employer sought to redeploy you and issued you with an employment contract.
You challenged the redeployment and claimed that the new position was not 'suitable'.
You commenced proceedings against your Employer.
You sought legal advice.
You and your Employer reached agreement on the terms via a legal deed of settlement.
Your Employer agreed to pay you.
As a consequence you resigned from your employer.
You were charged by your legal representatives $XXXX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1