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Edited version of private advice
Authorisation Number: 1052347558074
Date of advice: 10 January 2025
Ruling
Subject:Deductions - legal expenses
Question 1
Are the legal expenses you incurred of $XX, regarding your employment (performance improvement plan (PIP)) tax deductible?
Answer 1
Yes.
The legal expenses directly relate to safeguarding your employment and a matter that was directly related to the performing your daily work duties, from which you derive assessable income. Your legal expenses follow the advantage sought and, in this case, will be an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997, as they have the necessary connection with your employment and are neither capital nor private in nature.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
XX XXXX 20XX
Relevant facts and circumstances
On XX XXXX 20XX, you commenced employment with Employer A.
On XX XXXX 20XX, you were notified by your employer that you were going to be put on a PIP.
You asked your employer to provide reasons why you were required to go on the PIP, however they did not provide the reasons.
On XX XXXX 20XX, you contacted Lawyer A for their advice on the PIP.
On XX XXXX 20XX, you made the payment of $XX to Lawyer A.
On XX XXXX 20XX, you received advice from Lawyer A.
For a month, you went on sick leave with pay. This postponed your PIP.
On XX XXXX 20XX, you received advice from Lawyer A.
On XX XXXX 20XX, you made the payment of $XX to Lawyer A.
On XX XXXX 20XX, your employer implemented the PIP after you returned to work.
On XX XXXX 20XX, you notified your employer that you were resigning from your role.
On XX XXXX 20XX, you ceased working for Employer A.
In total you incurred $XX from Lawyer A. You will not incur further legal expenses relating to this matter.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1