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Edited version of private advice
Authorisation Number: 1051866712333
Date of advice: 15 July 2021
Ruling
Subject: Legal expenses - employer agreement
Question
Are the legal, court and other costs 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 for you as an individual and therefore an allowable deduction. Any expense incurred that you are a party of, you will need to apportion your share as stated in Taxation Determination TD 93/29. The expense is not of a private or 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 the employer 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 incurred costs relating to the dispute and further costs will be incurred until a settlement is agreed upon.
You have no entitlement to reimbursement in respect to costs incurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1