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  • Volkswagen, Skoda and Audi emissions settlement payments

    An income tax treatment may apply to a settlement payment you receive from the Volkswagen, Skoda and Audi class action.

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    What is the emissions class action?

    A class action was brought against Volkswagen, Skoda and Audi in relation to the global diesel fuel emissions issue.

    The class actions settled after 4 years of litigation. On 1 April 2020 the Federal Court approved the settlement in Australia.

    You need to consider the income tax treatment of any settlement payment you receive as an individual. Generally, a settlement payment is a capital payment and not ordinary income.

    Payments you receive for these kinds of losses are not usually taxable as a capital gain tax (CGT) event. They instead reduce the cost base of your asset (such as your car).

    Settlement payments and your tax return

    The income tax treatment of your settlement payment will depend on:

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

    • 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 settlement payment has no CGT impact for cars. However, the settlement payment will change the cost base for the car.

    Last modified: 26 Apr 2023QC 72111