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28 Nov 12 Reimbursement of legal costs in disputes concerning employment termination - TR 2012/8

On 28 November 2012, the ATO issued final Taxation Ruling TR 2012/8 entitled "Income tax and fringe benefits tax: assessability of amounts received to reimburse legal costs incurred in disputes concerning termination of employment".

It was previously issued in draft form as TR 2012/D2.

The Ruling states:

"4. An amount received in relation to a dispute concerning termination of employment is not an ETP, nor forms part of an ETP, where the amount is capable of being identified as relating specifically to the reimbursement of legal costs.

5. Where a deduction for legal costs is available to the recipient under s 8-1, a settlement or award in respect of legal costs will be included in the recipient's assessable income as an assessable recoupment under Subdivision 20-A.

6. If the amount of a settlement or court award received is a lump sum where the component of the receipt that relates to legal costs has not been and cannot be determined, then the whole amount is treated as being received in consequence of termination of employment...

7. A reimbursement of legal costs incurred in a dispute concerning termination of employment will not have a sufficient or material connection to the former employment to fall within the meaning of 'fringe benefit' in s 136(1) of the Fringe Benefits Tax Assessment Act 1986."


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