I am a former Director of a company, and the company has indemnified me for legal expenses for matters relating to my time as a Director i.e. there are some legal matters going on now that I need to help the company with, and they pay for my legal fees.
Is their payment of the legal fees (they pay me the exact amount the lawyers invoice me for and I pay the lawyers) classified as a reimbursement, and thus not assessable income?
This must be a very common situation as most former Directors of big companies are indemnified. It would be strange to me, if former Directors had to pay tax on the indemnification payments, as then they are out of pocket for something the company is supposed to cover in full. The ATO should be getting their tax from the law firm which is receiving income. I wanted to just check what the right treatment is for me- is it as a reimbursement?
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