Draft Taxation Determination

TD 92/D219

Income tax: under what circumstances is the receipt of a lump sum out of court settlement payment assessable income under subsection 25(1) of the Income Tax Assessment Act 1936?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 93/58.

FOI status:

draft only - for comment


Draft Taxation Determinations (TDs) represent the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. It is assessable income under subsection 25(1)

where the receipts are compensation for losses of an income nautre only e.g. past year profits, interest; and

where there was no expectation of any capital receipts being received e.g. loss of reputation; and
even if the basis of calculation of the lump sum cannot be determined.

where receipts are of both an income and capital nature and the basis of calculation of the income component can be determined.

2. The decision in FC of T v. Spedley Securities Limited 88 ATC 4126; (1988) 19 ATR 938 does not apply in these circumstances. The Full Federal Court in its reasons concluded:-

'The payment made was in settlement of a number of claims as evidenced by the matters put during the settlement discussions and negotiations.'

'There was therefore evidence upon which the Tribunal could hold that the payment was, at least in a substantial part, recompense for damage to its reputation.'

'The point of the present case is that what was received was a lump sum, the ingredients of which were not identified...'

Commissioner of Taxation


ATO references:
NO UMG 0023

ISSN: 1038-8982

Subject References:
lump sums
settlement sums

Legislative References:
ITAA 25(1)

Case References:
FC of T v. Spedley Securities Limited
88 ATC 4126
(1988) 19 ATR 938