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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012556794573

Ruling

Subject: Compensation payments

Question and answer:

Are the monthly compensation payments received by you assessable income?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You receive periodical payments from a disability policy.

The disability policy provides for indemnity for work incapacity due to illness.

You suffered illness during your work situation.

The insurance company determined your disability rate to be more than 33% and commenced periodical payments to you.

You use the payments to pay bills associated with your condition.

Relevant legislative provisions

Income tax Assessment Act 1997 Section 6-5(2)

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Based on case law, it can be said that ordinary income generally includes receipts that:

In your case the monthly payments you are receiving have the characteristics of ordinary income as the payments are expected by you (you have been notified of continuing payments), the payments are relied on by you (you use the payments to pay bills associated with your condition) and they have an element of periodicity, recurrence or regularity (the payment is paid to you periodically).

The payments are therefore ordinary income, are assessable and should be declared in your tax return.

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