ATO Interpretative Decision
ATO ID 2002/875 (Withdrawn)
Income Tax
Lump sum payment in arrears tax offset - lump sum interest paymentFOI status: may be released
-
This ATO ID is a straight application of the law and does not contain an interpretative decision.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 payment in arrears tax offset under section 159ZRA of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of a lump sum payment of interest received?
Decision
No. The taxpayer is not entitled to a lump sum payment in arrears tax offset under section 159ZRA of the ITAA 1936 as the interest received is not eligible income for the purposes of the tax offset.
Facts
The taxpayer invested funds in a first mortgage investment with a professional person.
The taxpayer's investment collapsed. Since the date of collapse the taxpayer received no interest and had no access to the principal they invested.
The taxpayer made a claim for compensation to cover their losses as a result of the collapse of their investment. The claim was made to the professional body of which the professional person was a member.
The professional body allowed the taxpayer's claim. The compensation paid consisted of the amount of principal invested plus interest. The interest was calculated on the outstanding principal from the date of default of the professional person to the date of approval of the claim.
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. The definition does not include interest income.
As the lump sum payment of interest is not an 'eligible lump sum', the taxpayer is not entitled to a lump sum payment in arrears tax offset under section 159ZRA of the ITAA 1936.
Date of decision: 16 August 2002Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
subsection 159ZR(1)
subsection 159ZRA
Keywords
Interest income
Income arrears rebates
Lump sum payments
Lump sum payments in arrears
Lump sum payments in arrears rebates
ISSN: 1445-2782
| Date: | Version: | |
| 16 August 2002 | Original statement | |
| You are here | 28 October 2005 | Archived |