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Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA1997) for legal expenses incurred to defend a claim for spousal maintenance and to vary a property settlement?

No. The legal expenses are of a private nature and not deductible in accordance with paragraph 8-1(2)(b) of the ITAA 1997.

The taxpayer's former partner commenced legal proceedings for spousal maintenance and to revise a property settlement made at the time of separation.

The taxpayer incurred legal expenses to defend these claims.

These expenses were paid from the taxpayer's business bank account.

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 or in carrying on a business for that purpose, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

The expenses incurred are not incurred in gaining or producing the taxpayer's assessable income. Furthermore, a taxpayer's marital arrangements are normally regarded as being private in nature. Therefore, any expenditure related to a taxpayer's marital status is regarded as being of a private or domestic nature.

Any legal expenses incurred by the taxpayer to defend a claim for spousal maintenance are regarded as arising directly from the taxpayer's marital status. Therefore, the legal expenses are of a private nature and not deductible in accordance with paragraph 8-1(2)(b) of the ITAA 1997.