Issue
Are legal expenses incurred by a partner in a partnership in respect of Family Court matters an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. Legal expenses incurred by a partner in a partnership in respect of Family Court matters are not an allowable deduction under section 8-1 of the ITAA 1997 as the expenses are of a private or domestic nature.
Facts
The taxpayer was a partner in a partnership. The taxpayer was engaged in Family Court proceedings and incurred legal expenses defending claims in respect of disputed assets owned by the partnership. The taxpayer also had to defend the issue of shares in a family company to family members.
The legal expenses were paid by the taxpayer.
Reasons for Decision
Section 8-1 of the ITAA 1997 provides that a loss or outgoing is an allowable deduction if it is incurred in producing assessable income or in carrying on a business for the production of assessable income, unless that loss or outgoing is capital or of a capital, private or domestic nature.
Legal expenses incurred defending Family Court proceedings relate to a private or domestic matter and are, therefore, not deductible under section 8-1 of the ITAA 1997.