Which legal expenses are tax deductible for businesses?

Knowing what type of legal expenses are tax-deductible is valuable information when it comes to budgeting and allocating funds for emergencies.

Legal expenses that pay for business operations integral to producing an assessable income are tax-deductible. However, if the legal fee is capital, domestic or private in nature, then it will not be tax-deductible unless explicitly stated otherwise in legislation.

Legal expenses that can be claimed (This is not an exhaustive list):

•Negotiating contracts with existing employees (including disputes) with respect to employment arrangements

•Defending wrongful dismissal allegations brought on from employees or directors

•Defending a defamation action

•Opposing developments in the neighborhood that may adversely affect the business (depends on facts of the case)

•Evicting a rent-defaulting tenant

•Pursuing claims for workers compensation

Legal expenses that cannot be claimed (This is not an exhaustive list)

•Costs of negotiating employment contracts with new employers

•When defending driving charges (irrespective of whether driving on company business)

•Defending sexual assault charges or racial vilification that occurred within the workplace

•For the eviction of a tenant whose lease period has expired

•Challenging redundancy or seeking increased redundancy amount

It is wise to have a basic understanding of how tax deductions work when you own a business. Even a rudimentary understanding will allow you to prepare your budget and finances to accommodate for potential legal complications.

Please do not hesitate to contact our office on (03) 9728 1448 with any queries.

The team at TAS.



This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication. Publication February 2021