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Edited version of private advice
Authorisation Number: 1051659166387
Date of advice: 14 April 2020
Ruling
Subject: Legal expenses
Question
Are the legal expenses associated with the settlement of a dispute with your employer arising under the enterprise agreement an allowable deduction?
Answer
Yes.
Taxation Ruling TR 2000/5 Income tax and fringe benefits tax: costs incurred in preparing and administering employment agreements sets out the Commissioner's view of the application of section 8-1 of the Income Tax Assessment Act 1997 to costs incurred by employees and employers in preparing and administering employment agreements. An employment agreement is a reference to an agreement between an employee and an employer regarding employment.
In your case, the legal expenses are incurred in protecting an existing right under the employment agreement and therefore an allowable deduction. It is not an expense of a private or of a capital nature.
This ruling applies for the following periods:
Years ending 30 June 20XX to 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You work for an employer.
You are remunerated under the terms set out in an Enterprise Agreement (EA).
The applicable legislation governs the operation of the Scheme, of which you are a member.
You are in dispute with your employer as you allege they have contravened the EA. You claim it has failed to make the correct compulsory employer superannuation contributions as required by the Superannuation Act 1990 and its regulations.
You engaged legal representation resulting in proceedings lodged to the federal court with the Division of Fair Work.
You have no entitlement to reimbursement in respect to costs incurred.
Relevant legislative provisions
Income Tax Assessment Act 1997section 8-1