As a shareholder in a company, you may be faced with legal fees related to drafting and negotiating a shareholders agreement. It`s important to understand whether or not these fees are tax deductible with the Australian Taxation Office (ATO).
Firstly, it`s important to note that legal fees incurred in relation to the acquisition or disposal of shares are generally not tax deductible. However, legal fees related to the drafting and negotiation of a shareholders agreement may be treated differently.
The ATO`s general stance is that legal fees incurred in the course of carrying on a business are tax deductible. If the drafting and negotiation of a shareholders agreement is deemed to be part of the ongoing business operations, then the legal fees may be tax deductible.
It`s crucial to keep accurate records of the legal fees incurred and the portion of those fees that are related to the shareholders agreement. This documentation will be required if the ATO investigates the tax deductibility of the legal fees.
It`s also worth noting that the tax treatment of legal fees related to a shareholders agreement may differ depending on the specific circumstances. For example, if the agreement is being drafted as part of a business restructuring, then the legal fees may be treated differently.
In summary, legal fees related to the drafting and negotiation of a shareholders agreement may be tax deductible with the ATO if they are deemed to be part of the ongoing business operations. It`s important to keep accurate records and seek professional advice to ensure the correct tax treatment of these fees.