This Ruling, issued on Wed 28.11.2012, provides the Commissioner’s views on whether amounts received in respect of legal costs incurred in disputes concerning termination of employment should be included in assessable income. It also considers the FBT consequences of legal costs incurred in a dispute but does not consider the GST and CGT consequences.
The Ruling applies to both court ordered awards of identified and particularised legal costs and the specified or identifiable amount in relation to professional legal costs included in a dissected settlement sum paid in respect of termination of employment.
Broadly, the Ruling states that where an amount is capable of being identified as relating to specific legal costs in relation to a dispute concerning a termination of employment, the amount is not an ETP, nor does it form a part of an ETP.
The Ruling also states that a reimbursement of legal costs incurred in a dispute concerning the termination of employment will not have a sufficient or material connection to the former employment to fall within the meaning of a “fringe benefit” under s 136(1) of the FBTAA.
The Ruling was previously issued as Draft Taxation Ruling TR 2012/D2 and is largely unchanged.
DATE OF EFFECT: Applies both before and after its date of issue.
[LTN 231, 28/11]