Which legal fees are tax deductible?

This article and the below table summarise some of the common legal fees and the common application of the income tax deductibility rules.

Legal fee deductibility is a complex topic. If in doubt, please seek tax advice.

*Always seek specialist advice that is tailored to your situation and risks.

The below table can also be downloaded as a pdf:

Legal Fees Deductibility

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Common legal fees and income tax deductibility

Approach to classifying legal fees	Deductible	Non-Deductible	Capital Investment	Commentary
Step 1: Is the total amount spent for the year on legal fees $10k or less	✅
Step 2: If the spend on legal fees is greater than $10k then you will have to consider the following legislative requirements:
General permission	✅
Capital limitation			Capitalise
Private limitation		✅

Examples	Deductible	Non-Deductible	Capital Investment	Commentary
Maintenance share register - transfer of shares		✅
Special or Extraordinary meeting		✅		Depends on situation
Alteration of constitution		✅
Alteration of shareholder rights		✅
Liquidation		✅
Expenses incurred in the sale of the business		✅
Expenses incurred in incorporating or liquidating a company		✅
Cost of drawing up a partnership deed or deed of trust		✅
Settling any dispute between partners		✅
The costs of registering new trademarks		✅
Audit fees	✅
Payment dividends	✅
AGM	✅
Arrangements with creditors	✅
Lending arrangements	✅
Ratifying actions of Directors or breaches in their duty to the company	✅			Depends on the situation - generally deductible where the Company is carrying on a business
Expenses of defending breaches of law committed by an employee	✅
Cost of removing an obstacle to trading or safeguarding or preserving an existing business	✅
Costs incurred in attempting to recover any sum which would be assessable income if received	✅
Expenses incurred in attempting to abate expenditure that would be deductible	✅
Expenses incurred by an employee whilst on the job for traffic infringement or other regulations unless the employer is implicated in the illegal acts of the employee or the employee was not engaged in carrying on the lawful business of the employer	✅
Costs incurred in appointing Company Directors and the Company's legal advisors	✅
Expenses incurred in connection with valuing trading stock for the sale or purchase of business	✅
Major transactions	✅		✅	Depends on situation
Capital transactions - Business Purchase, Purchase of Assets			✅

Disclaimer

This article is for informational purposes only and should not replace specific tax advice. For

personalised advice please contact us. 

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