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deduction for costs associated with settlement of disputes arising out of an existing employment

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Hi All,

 

Can a taxpayer (individual) claim as deduction for costs (legal costs) associated with settlement of disputes arising out of an existing employment agreement including the cost of representation.

 

As per ruling TR 2000/5 my understanding is that the costs can be claimed as deduction.

 

Thanks

MK

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ATO Community Support

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Hi @MKN1,

 

Thank you for reaching out to us. Employment agreement legal expenses - According to taxation ruling TR 2000/5, there are certain legal fees with regard to employment that can be deductible. For employees the following are an allowable deduction:

  • costs of drawing up an employment agreement with an existing employer to replace an award or in accordance with a provision in the existing agreement
  • costs associated with settlement of disputes arising out of an existing employment agreement, including the cost of representation
  • costs of changing the conditions of an existing employment agreement with the same employer (providing the existing agreement allows for changes), be it a variation, re-negotiation of an existing agreement or upon a promotion
  • costs of renewing or extending a fixed term agreement that has a provision allowing for renewal or an extension at the end of a term.

The following costs incurred by an employee are not allowable deductions:

  • costs of drawing up an employment agreement with a new employer
  • costs of drawing up an employment agreement upon re-employment with an employer following termination of a fixed term employment contract where the agreement makes no provision for renewal or extension.

 

You would claim under other work related expenses on myTax. 

 

Hope this helps.

Regards,

Jodie2.

 

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 0

Hi @MKN1,

 

Thank you for reaching out to us. Employment agreement legal expenses - According to taxation ruling TR 2000/5, there are certain legal fees with regard to employment that can be deductible. For employees the following are an allowable deduction:

  • costs of drawing up an employment agreement with an existing employer to replace an award or in accordance with a provision in the existing agreement
  • costs associated with settlement of disputes arising out of an existing employment agreement, including the cost of representation
  • costs of changing the conditions of an existing employment agreement with the same employer (providing the existing agreement allows for changes), be it a variation, re-negotiation of an existing agreement or upon a promotion
  • costs of renewing or extending a fixed term agreement that has a provision allowing for renewal or an extension at the end of a term.

The following costs incurred by an employee are not allowable deductions:

  • costs of drawing up an employment agreement with a new employer
  • costs of drawing up an employment agreement upon re-employment with an employer following termination of a fixed term employment contract where the agreement makes no provision for renewal or extension.

 

You would claim under other work related expenses on myTax. 

 

Hope this helps.

Regards,

Jodie2.

 

ATO Community Support

Replies 1

Hi @MKN1 

 

The ruling you quote is quite clear under Employee costs 2.

The following costs incurred by an employee are an allowable deduction:

 

- costs associated with settlement of disputes arising out of an existing employment agreement including the cost of representation;

 

If your in doubt somewhat as to the application to your particular senario it may be worth reviewing the options at Legal expenses- supporting information.

Initiate

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Thanks All.