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01 Jul 13 Legal costs not deductible – Theglory

The Administrative Appeals Tribunal has affirmed a decision of the Secretary to the Department of Families, Housing, Community Services and Indigenous Affairs not to treat as an allowable deduction the legal and associated costs a taxpayer incurred as a party to court proceedings. The result was that the taxpayer was not entitled to receive a higher rate of carer allowance: Re Theglory and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2013] AATA 444 (Senior Member A K Britton, 28 June 2013).

The taxpayer was in receipt of a carer allowance in respect of her husband. She challenged a decision made by the Secretary, and affirmed by the Social Security Appeals Tribunal, which concerned the rate of carer allowance payable to her during the 2011 tax year. Under the Social Security Act 1991 (Cth) the rate of carer allowance payable to the taxpayer was determined by reference to, among other things, her “ordinary income”, which was reduced by any “allowable deduction”. She contended that Centrelink erred by not treating as an allowable deduction the legal and associated costs she incurred as a party to proceedings in the NSW Supreme Court. If she were correct her ordinary income would be reduced and, as a consequence, she would be entitled to receive a higher rate of carer allowance.

The claimed legal costs and associated expenses related to proceedings before the Supreme Court in relation to the alleged sale of taxi plates, a taxi licence and the taxi itself.

The Tribunal found that the claimed legal costs were of a capital nature and not deductible.

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