ATO Interpretative Decision
ATO ID 2002/1032
Income Tax
Lump sum in arrears tax offset- Income protection insurance policyFOI status: may be released
This version is no longer current. Please follow this link to view the current version. |
-
This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer entitled to a lump sum in arrears tax offset under section 159ZRA of the Income Tax Assessment Act 1936 (ITAA 1936) with regard to a lump sum payment received by the taxpayer under an income protection insurance policy?
Decision
No. The taxpayer is not entitled to a lump sum in arrears tax offset under section 159ZRA of the ITAA 1936 with regard to a lump sum payment received by the taxpayer under an income protection insurance policy.
Facts
The taxpayer received a lump sum payment under an income protection insurance policy. The taxpayer was the policyholder.
The lump sum represented lost income which would have been earned by the taxpayer. It was calculated by reference to a fortnightly rate for a specific period covering more than one income year.
Reasons for Decision
Section 159ZRA of the ITAA 1936 allows a lump sum payment in arrears tax offset where the taxpayer's assessable income in a year of income includes one or more 'eligible lump sums'.
An 'eligible lump sum' is defined as a lump sum payment of 'eligible income' received on or after 1 July 1986 that is included in the assessable income of the taxpayer and accrued, in whole or in part, in an earlier year or years of income (subsection 159ZR(1) of the ITAA 1936).
'Eligible income' is defined in subsection 159ZR(1) of the ITAA 1936 to mean certain specified types of income. Paragraph 159ZR(1)(c) of the ITAA 1936 includes in this definition payments covered by section 12-80 or section 12-120 in Schedule 1 to the Taxation Administration Act 1953 (TAA). Section 12-120 in Schedule 1 to the TAA refers to a payment that is;
- •
- in respect of an incapacity for work;
- •
- calculated at a weekly or other periodical rate; and
- •
- is not a payment made under an insurance policy to the policy owner.
The lump sum was made under a policy of insurance to the taxpayer who was the owner of the policy. Therefore this lump sum is excluded from the definition of 'eligible income' and consequently is not an 'eligible lump sum'. Accordingly the taxpayer is not entitled to a lump sum in arrears tax offset under section 159ZRA of the ITAA 1936.
Date of decision: 24 September 2002Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
subsection 159ZR(1)
section 159ZRA
section 12-80 of Schedule 1
section 12-120 of Schedule 1
Keywords
Rebates
Lump Sum in Arrears rebate
Lump sum income protection policy
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 24 September 2002 | Original statement |
| 28 October 2005 | Archived |