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Edited version of private advice
Authorisation number: 1052243736530
Date of advice: 8 May 2024
Ruling
Subject: Legal expenses
Question
Are you entitled to a deduction for the legal expenses of $XX,XXX?
Answer
Yes
The courts have held that legal expenses are deductible if they were incurred by a taxpayer in defending the manner in which they undertook their day to day income earning activities (for example, Magna Alloys & Research Pty Ltd v. Commissioner of Taxation of the Commonwealth of Australia [1980] FCA 180; Putnin v. Federal Commissioner of Taxation (1991) 27 FCR 508; and Federal Commissioner of Taxation v. Snowden & Willson Pty Ltd (1958) 99 CLR 431). You are entitled to a deduction for your expenditure of $ XX,XXX as it was incurred in defending the way in which you carried out your employment duties.
This ruling applies for the following period:
Year ended 30 June 20YY
The scheme commenced on:
XX/XX/20XX
Relevant facts and circumstances
A complaint was lodged with the Board that regulates the profession in which you are employed.
The complaint was lodged about the way in which you carried out your employment duties.
As a result of the complaint, you were found guilty of unsatisfactory professional conduct.
You lodged an application with the Administrative Tribunal in your State to dispute the complaint and the decision made by the Board.
The Administrative Tribunal upheld the decision made by the Board.
The decision under review was affirmed and you were advised you had to pay the costs incurred by the Board.
You approached your indemnity insurance provider who responded advising that they decline to indemnify you and listed the exclusions (Referring to Policy clauses) as to why they would not pay a claim.
The Board was willing to compromise its claim and offered to accept the sum of $XX,XXX in full and final payment of its costs.
You paid this amount during the 20YY income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1