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Edited version of your private ruling
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Ruling
Subject: Assessable income - award of assistance payment
Question
Is the portion of your award of assistance payment identified as 'loss of wages' assessable income?
Answer: Yes.
This ruling applies for the following period:
Year ending 30 June 2012
The scheme commenced on:
1 July 2011
Relevant facts and circumstances
You received an award of assistance payment.
A portion of the award was identified as being for loss of wages.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Ordinary income has been held to include income from providing personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that:
· are earned
· are expected or relied upon
· have an element of periodicity, recurrence or regularity
· replace income.
Payments of salary and wages are income according to ordinary concepts and are included in assessable income under section 6-5 of the ITAA 1997.
An amount paid to compensate for loss generally acquires the character of that for which it is substituted (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 5 ATR 443; 10 ATD 82).
Taxation Determination TD 93/58 outlines the circumstances under which the receipt of a lump sum compensation or settlement payment is assessable as ordinary income. TD 93/58 states that where the compensation payment is for loss of income, the amount is assessable as ordinary income. Where a portion of a lump sum payment is identifiable and quantifiable as income, that portion of the payment will be assessable.
You have provided a copy of the payment that specifies an amount paid for loss of wages. You were also reimbursed for expenses actually incurred, counselling and financial assistance.
The component of the award of assistance payment that was paid for loss of wages is assessable as ordinary income under section 6-5(2) of the ITAA 1997.
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