Are legal fees tax deductible?


This came up with one of my clients recently when we discussed the recent class action, but it's a problem many of us have faced.

In Australia, by world standards, we have many legal cases. I read that the state in the world with the highest number of court cases per person is California, USA; the next highest is NSW, Australia. Plus, Australian Legal fees are high by world standards. One incredible screen in the SCI-FI show, Star Trek, was where they had a lawyer who did not care about money. Lawyers care about money.

Okay, so can we claim their costs?

The answer is that it depends on what they are. My client has discovered that his fees are not claimable even though they were for his business. Claimable expenses are those required to produce income and carry on a business.

The ATO guidelines are here.

Note: As a guy who got dragged into court, I can tell you it's rarely worth it. Despite what people tell you, rarely does anyone care.  Also, courts are like hospitals; once you are in, it is tough to get out. My case took about ten years before we settled. Even if you win as I consider I did, it was a waste of a lot of money. Wonder how they felt. They lost and had to pay their legal fees and a settlement to me too.

Anyone who wants to tell me their experience?

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