Hello, I was served with a writ in County Court (Vic) from my ex-employer accusing me of violating my employment agreement that I had with them. The underlying subject matter was they said they were entitled to some IP. Anyway, we settled confidentially out of court. I claimed the legal expenses in my personal tax (D5 - work related deductions). Since it was a high amount, it got flagged by ATO and they did an audit. They have rejected the claim since they believed it was 'capital in nature relating to an asset (which asset I ask) rather than the derivation of income from that asset'. I don't see how that is relevant. I would think it is related to settling a dispute arising out of employment agreement - which is deductible I believe under TR 2000/5. I guess they see the fact that it related to IP and it was in their eyes a fight over IP (asset) they may have just ruled that way, but surely the underlying issue was it was a dispute relating to employment agreement? Thanks in advance if anyone can shed light on this.