ANG Partners have successfully lodged an application of private ruling relating to legal expense and been granted approve by Deputy Commissioner of Taxation.

The fact is that, one of our clients Miss A is a migration client. She incurred $42,000 legal expense to defend herself in a court case. Because her client lodged a VCAT application against her in relation to how her visa application had been handled and claimed $200,000 for compensation. Her client also lodged a complaint with the office of Migration Agents Registration Authority (MARA) with the intention for her to be deregistered.  Miss A got a solicitor to defend the claim and cost her $42,000. Total costs were paid by her personally and were not reimbursed by company or her business insurance. Eventually, Miss A’s client withdrew both the VCAT application and the MARA complaint due to lack of evidence. Miss A put all legal cost in to her tax return and ATO issued an audit notice to her because too much deduction for legal expense.

For individuals incurring legal fees, the expense incurred would not be deductible unless there is a clear nexus with the expense being incurred in deriving assessable income. For example, fines are not deductible. Miss A visited us and ask for advice. We lodged the private ruling application with two pages statement and all supporting documents to ATO. The answer from ATO taxation commissioner is that “The legal expenses you incurred arose out of the need to defend your actions whilst carrying out your duties through which you gain or produce assessable income. The legal expenses are therefore deductible under section 8-1 of the Income Tax Assessment Act 1997.”

Once again, ANG Partners assist client to pass ATO audit and get approve in private ruling. If you have similar case face or other issues, please do not hesitate to contact us. We will help you.