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  • Volkswagen, Skoda and Audi emissions settlement payments

    If you receive a settlement payment as the result of a class action, you need to consider if any tax treatments apply to the payment.

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    Background

    This information addresses the class actions bought against Volkswagen, Skoda and Audi in relation to the global diesel fuel emissions issue.

    The class actions settled after four years of litigation. On 1 April 2020 the Federal Court approved the settlement in Australia.

    You need to consider the tax treatment of any settlement payment you receive as an individual. Generally, a settlement payment is a capital payment and not ordinary income. Often, payments you receive for these kinds of losses are not taxable as a capital gain tax (CGT) event, but instead reduce the cost base of your asset (such as your car).

    A car is a vehicle designed to carry a load of less than one tonne and less than nine passengers.

    Tax treatment

    The tax treatment of your payment will depend on:

    • how you use your vehicle
    • if the vehicle is defined as a car or other vehicle.

    Settlement payment and your tax return

    You don’t need to declare a settlement payment you receive in your tax return for either a car you use for:

    • private purposes only
    • both a private and work-related use.

    CGT and settlement payments

    Generally, if you sell a car there are no CGT implications.

    As there is no CGT on the sale of cars, the payment has no CGT impact for cars. However, it will change the cost base for the car.

      Last modified: 14 Jul 2021QC 66375