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Edited version of private advice
Authorisation Number: 1051929320037
Date of advice: 8 December 2021
Ruling
Subject: Legal expenses
Question
Are you able to claim a deduction for legal expenses incurred while defending a claim of professional negligence against you?
Answer
Yes.
Section 8-1 of the Income Tax Assessment Act 1997 allows for a deduction for a loss or outgoing to the extent that it is incurred in gaining or producing your assessable income.
Accordingly, you are entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses you incurred in defending a claim of professional negligence against you while instructing as a personal trainer.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 20 June 20XX
The scheme commences on:
3 February 20XX
Relevant facts and circumstances
You were contracted as sole trader for a business to run fitness classes.
And incident occurred during a fitness class that you were instructing by a member of the class.
As a result, the member of the fitness class brought a civil lawsuit against yourself and the owners of the business claiming professional negligence.
You sort legal advice from a law firm and were charged a total of $XX,XXX Between X/X/20XX and XX/XX/20XX for legal representation, advice, and court costs.
Relevant legislative provisions
Section 8-1 Income Tax Assessment Act 1997