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Edited version of private advice
Authorisation Number: 1052340442846
Date of advice: 9 January 2025
Ruling
Subject: Legal expenses
Question
Can you claim a deduction for your legal expenses in accordance with section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
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 ITAA 1997to costs incurred by employees and employers in preparing and administering employment agreements.
In your case, the legal expenses were incurred costs associated with the settlement of disputes arising out of an existing employment agreement including the cost of representation, and therefore an allowable deduction.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
XX XX 20XX
Relevant facts and circumstances
In 20XX you were diagnosed with a medical condition.
On XX XX 20XX you commenced employment with Company A (the Company).
On XX XX 20XX you entered into an Employment Agreement with the Company.
From XX XX 20XX to XX XX 20XX, you took a period of personal leave due to your medical condition.
On XX XX 20XX, you were admitted to hospital due to your medical condition.
On XX XX 20XX you emailed with your employer. Your employer suggested that you commence a staggered return to work process due to your health. You received approval for this approach from your specialist.
On XX XX 20XX you provided the Company with a medical certificate authorising your return to work on modified duties and reduced hours.
On XX XX 20XX you returned to work on light duties.
On XX XX 20XX your specialist provided the Company with additional medical correspondence. Specifically, they stated that you were to continue in your working arrangement until XX XX 20XX where a further review of your medical condition would be undertaken.
On XX XX 20XX you met with Legal Practice A to determine possible options to progress your dispute with your employer.
On XX XX 20XX you were invoiced by Legal Practice A for professional fees.
On XX XX 20XX you received a proposal for representation from Legal Practice A.
On XX XX 20XX your specialist provided a medical report to your employer.
On XX XX 20XX Legal Practice A issued a letter to the Company requesting to formalise your flexible working arrangement.
On XX XX 20XX you received a letter from the Company stating their agreement to your terms.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1