Edited version of private advice

Authorisation Number: 1051780379769

Date of advice: 16 November 2020

Ruling

Subject: Deductions - legal expenses

Question

Are your legal expenses deductible?

Answer

Yes. Legal expenses incurred in order to obtain assessable income are an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997. As the legal action taken relates solely to the reinstatement of your workers compensation income payments. You are entitled to a deduction for the full amount of your legal expenses.

This ruling applies for the following period:

Financial year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were injured in the workplace and submitted a workers' compensation claim which was accepted.

You had been in receipt of weekly payments under your state's workers compensation legislation.

A review of your entitlement to weekly payments was conducted and you were notified in writing that you were no longer entitled to the payments.

You disagreed with the decision to terminate your entitlement and you lodged a request for conciliation.

The conciliation officer was unable to bring the parties involved to an agreement but found that there was an arguable case and issued a certificate that all reasonable steps had been taken to settle the dispute and that an application could be made to a court to determine the matter.

You sought legal assistance to represent your matter in the courts and have incurred legal expenses.

As a result of the court action your workers' compensation claim was reinstated with your entitlement to receive weekly payments back dated to the date the payments were originally terminated.

You have received a lump sum amount, deposited into your nominated bank account representing the back payment of your entitlement to weekly payments.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1