Edited version of private advice

Authorisation Number: 1051685053555

Date of advice: 5 June 2020

Ruling

Subject: Legal expenses

Question

Are the legal expenses you incurred associated with a dispute with your employer arising under the enterprise agreement an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. Taxation Ruling TR 2000/5 sets out the Commissioner's view of the application of section 8-1 of the ITAA 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.

When your legal action has settled, if your employer reimburses you for your legal fees, this amount will be required to be declared on your income tax return as income the year it was received.

This ruling applies for the following periods:

Year ending 30 June 2020

Year ending 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are employed.

You are remunerated under the terms set out in an Collective Agreement (CA).

You are in dispute with your employer as you allege they have contravened the CA.

You claim your employer has failed to make the correct compulsory employer superannuation contributions as required by the Superannuation Act 1990 and its regulations.

You have incurring costs relating to the dispute and you believe further costs will be incurred until settlement of the matter.

There will not be any reimbursement to you for the expenses directly or through an allowance.

Relevant legislative provisions

Income Tax Assessment Act 1997section 8-1