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04 Aug 09 Decision Impact Statement - Romanin

On 3 August 2009, the ATO issued a Decision Impact Statement in relation to the Federal Court decision in Romanin v FCT [2008] FCA 1532; 2008 ATC 20-055. The case concerned whether legal expenses incurred in the conduct of proceedings in an industrial tribunal to receive a payment in lieu of termination notice is deductible under s 8-1 ITAA 1997. McKerracher J held that the payment for legal expenses was deductible under s 8-1 of the ITAA 1997 because, amongst other things, the proceedings were undertaken to enforce an entitlement to income (not to compensation or damages) that was contractually owed to the taxpayer.

The Commissioner lodged an appeal with the Full Court against his Honour's decision, but later decided to withdraw the appeal after further considering the correctness of the decision.

The Decision Impact Statement states that the following Determination and ATOIDs will need to be revised in accordance with the reasoning of the Federal Court:

  • TD 93/29 - Income tax: if an employee incurs legal expenses recovering wages paid by a dishonoured cheque, are these legal expenses an allowable deduction under s 51(1) of the ITAA 1936?
  • ATO ID 2002/656 entitled 'Legal Expenses - entitlements under an employment contract'
  • ATO ID 2002/657 entitled 'Legal Expenses - seeking a better redundancy package'.

For a copy of the Decision Impact Statement, go here


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