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This edited version has been archived due to the length of time since original publication.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 written advice

Authorisation Number: 1051272176230

Date of advice: 23 August 2017

Ruling

Subject: GST and ex-gratia payment

Question 1

Is the ex gratia payment you received from an out of court subject to the goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

Following an out of court settlement you received an ex gratia payment from an unrelated entity.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(2).

Reasons for decision

In this case we are informed that an entity accepted liability, settled out of court and agreed to make a one-off payment to you for loss of income.

Generally the act of settling will not be taxable for the purposes of the GST Act unless there is a nexus between the payment in respect of an earlier supply or if the settlement creates a new or current supply or there is a supply related to a discontinuance of action.

Goods and Services Tax Ruling GSTR 2001/4 considers the goods and services tax (GST) consequences resulting from court orders and out-of-court settlements.

All paragraphs further from the margin and quoted in smaller fonts in this ruling are from GSTR 2001/4.

In this case there is no earlier supply made by you to the entity.

There is also no current supply between the parties.

You informed that point (i), (ii) and (iii) above do not apply in this instance.

In your situation the money remitted to you by the entity was not paid in respect of something that was a taxable supply and the settlement also does not give rise to a taxable supply. Therefore, we consider that the payment to you is not the provision of consideration. Consequently you did not make a taxable supply. The payment received is not subject to GST.


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