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Are Legal Fees tax deductible?

An interesting question and relevant to me personally at this point in time.  As usual the answer to the question varies depending on the facts.  Tax is like that – always grey areas.  Which is why it pays to have a good advisor, a really good advisor, and even better if you have one who knows how the ATO works due to experience working for such.  Anyway, back to the question.  It depends on what the case is about.  If the case is about defending an issue which is to do with your business or income, it can be deemed to be on ‘revenue’ account and tax deductible.  However, if the case is about non income related issues such as a claim for personal harassment or defamation or personal damages due to a firm’s harassment then the fees will be on ‘capital’ account and not tax deductible.  Good news however, is that if on ‘capital’ account – the huge winnings for damages will be also on capital account and not taxable.

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