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This edited version has been archived due to the length of time since original publication.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 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