Extending the CGT exemption for certain compensation payments and insurance policies

On 19 March 2015 Tax and Superannuation Laws Amendment (2014 Measures No. 7) Act 2015 received Royal Assent.

Before this amendment the law provided for a CGT exemption for capital gains and capital losses that result from a payment received by an individual in relation to compensation for

  • a wrong or injury suffered by that individual in their occupation, and
  • a wrong, injury or illness the individual or their relative suffered personally.

The legislation now supports the Commissioner's long standing administrative practice of extending this CGT exemption to capital gains and capital losses that resulted where a payment of compensation for wrong, injury or illness was paid to a trustee on behalf of an individual.

Similarly, capital gains arising from payments made under a policy of insurance on the life of an individual or an annuity instrument to a trustee are disregarded.

In both of these cases, the legislation also ensures that the CGT exemption applies to any capital gain or capital loss that a beneficiary makes when a distribution that is attributable to the compensation, damages or insurance payment is subsequently made to them by the trustee.

Capital gains and losses made by a trustee of a complying superannuation entity arising from payments they received under injury or illness insurance policies, life insurance policies and annuity instruments held on behalf of members are also exempt. The legislation clarifies that these payments are not taxed under any other provisions of the income tax law.

Legislation and supporting material

For more information refer to:

Administrative treatment

The amendments apply to the 2005-06 and later income years and now support the Commissioner's long standing practice in relation to these types of payments. If you have received a payment of this type in this period you may wish to review your assessment for the relevant income year and see whether any changes to the tax treatment you adopted are now necessary.

For more information

For more information about this measure, refer to:

    Last modified: 20 Apr 2015QC 24454