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This edited version has been archived due to the length of time since original publication.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

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Edited version of your written advice

Authorisation Number: 1051274539822

Date of advice: 30 August 2017

Ruling

Subject: Compensation payment

Question and answer

Is the victim of crime lump sum compensation payment that you received from the State Government assessable income?

No

This ruling applies for the following period:

Year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You received a victim of crime lump sum compensation payment from the State Government.

You received the compensation as a Victim of Crime (Financial assistance) Act 1983-CIC37 of 2015 based on meeting the criteria for section 10(1)(f) as special assistance.

Relevant legislative provisions

Reasons for decision

Subsection 6-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that assessable income consists of ordinary income and statutory income.

Ordinary income

Section 6-5 of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts, which is called ordinary income.

Ordinary income has generally been held to include three categories, namely income from rendering 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:

In your case, the payment you are entitled to receive is compensation for suffering caused by being a victim of crime.

The payment does not have the characteristics of ordinary income and was not earned by you and did not relate to services performed. The payment is also a one-off payment and does not have an element of recurrence or regularity. Although the payment can be said to be expected and perhaps relied upon, this expectation arises from suffering resulting from being a victim of crime.

Therefore the lump sum payment is not income according to ordinary concepts and is not assessable under section 6-5 of the ITAA 1997.

Statutory income

Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income but are included in assessable income by specific provisions of the income tax law, are called statutory income.

These specific provisions of the income tax law are listed in section 10-5 of the ITAA 1997, and include the capital gains tax (CGT) provisions.

Receipt of a lump sum payment may give rise to a capital gain. However, paragraph 118-37(1)(b) of the ITAA 1997 disregards payments or receipts for capital gains purposes where the amount relates to compensation or damages a person receives for any personal wrong, injury or illness.

In your case, the payment was made to you as a result of being a victim of crime, which is a personal wrong, and as such the payment is exempt from CGT under paragraph 118-37(1)(b) of the ITAA 1997.

Conclusion

As the victim of crime lump sum compensation payment is not ordinary income or a capital gain, it is not assessable income and does not need to be included in your income tax return.

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