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Edited version of private advice
Authorisation Number: 1051905409242
Date of advice: 1 October 2021
Ruling
Subject: Legal expenses
Question
Are you entitled to a deduction for the legal costs you incurred in obtaining an increase in the amount of workers compensation payments you were entitled to?
Answer
Yes. Section 8-1 of the Income Tax Assessment Act 1997 provides that you can deduct from your assessable income any loss or outgoing that you incur in gaining or producing your assessable income. There is a relevant connection between the legal costs you incurred and the earning of your assessable income.
This ruling applies for the following period period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You sustained an injury in carrying out your work duties.
You received workers compensation payments based on your average weekly wage.
The workers compensation payments you received were subsequently reduced.
You engaged a legal firm to lodge a claim for loss of income.
The claim was heard as the Administrative Appeals Tribunal (AAT) which found in your favour.
Your employer paid you an amount representing a back payment of lost income and also paid a proportion of your legal fees.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1