ATO Interpretative Decision
Income TaxLegal Expenses - to obtain superannuation payment before retirement age
FOI status: may be released
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Status of this decision: Decision Current
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in obtaining their superannuation lump sum payment before retirement age?
No, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in obtaining their superannuation lump sum payment before retirement age.
The taxpayer ceased work before retirement age as a result of a medical condition.
The taxpayer wanted to have access to their superannuation lump sum payment before they reached retirement age.
The taxpayer incurred legal expenses in order to pursue early payment of the superannuation lump sum.
The taxpayer received a superannuation lump sum payment during the current year of income.
Reasons for Decision
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.
In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered (Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634;  HCA 34). The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses.
The legal expenses were not incurred by the taxpayer in asserting their right to the superannuation payment but rather for early withdrawal of the monies from the taxpayer's superannuation fund. The early withdrawal of monies from the taxpayer's superannuation fund is an issue of a private nature. There is an insufficient nexus between incurring the legal expenses and the gaining of assessable income. The legal expenses are also private in nature and therefore not deductible under section 8-1 of the ITAA 1997.
|Date of amendment||Part||Comment|
|23 May 2014||Reason for Decision||Updated case references|
|Case References||Updated case references|
Income Tax Assessment Act 1997
Hallstroms Pty Ltd v. Federal Commissioner of Taxation
(1946) 72 CLR 634
 HCA 34
Deductions and expenses
Lump sum superannuation payments