Deduction - legal expenses

Non-binding edited private advice. This is an edited version of private advice the ATO gave to a specific taxpayer about their own circumstances. You cannot rely on it — it is not binding and provides no protection for anyone else (see PS LA 2008/4). Use it as a guide to the ATO’s thinking, not as authority.

Is the taxpayer entitled to claim a deduction for the Legal Expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. This ruling applies for the following periods : 1 July 20XX to 30 June 20XX 1 July 20XX to 30 June 20XX 1 July 20XX to 30 June 202XX The scheme commenced on: 1 June 20XX

The taxpayer is an employee of the Australian Public Service (APS). As such, the taxpayer is obliged to comply with the APS Code of Conduct. It was alleged that the taxpayer breached the APS Code of Conduct. The taxpayer was suspended on full pay pending an investigation. The final decision regarding the APS Code of Conduct investigation identified that a small number of breaches had been found arising from specific factual instances against the taxpayer. The taxpayer's legal representatives have provided sound arguments as to why the breaches in the final decision could not be found against the taxpayer. The taxpayer has provided instructions to legal representatives to commence court action if the arguments are not found in their favour. The taxpayer has incurred the Legal Expenses, in defending the allegations and associated alleged breaches of the APS Code of Conduct, to maintain their income producing role within the agency. The potential sanctions that could arise from negative findings include demotion, reassignment, pay reduction, financial penalties and termination. The taxpayer was an employee of the APS at the date of lodging this ruling application.

Income Tax Assessment Act 1997 section 8-1