| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1051297952883
Disclaimer
You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.
The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.
Date of advice: 20 October 2017
Ruling
Subject: Compensation – victim of crime
Question
Is the lump sum you received for loss of earnings assessable income?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 2018
The scheme commences on
1 July 2017
Relevant facts and circumstances
You were the victim of a violent crime.
You have received a loss of earnings grant paid under the State’s legislation.
The amount paid was calculated with reference to your earnings prior to the act of violence and your earnings in the following financial years. The calculation also took into account the period of time that you were unable and/or unfit to work.
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 an Australian resident includes the ordinary income they derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
In your case, you have received financial assistance in the form of a grant, for loss of earning as a result of an act of violence committed against you.
For income tax purposes, an amount paid to compensate for a loss generally acquires the character of that for which it is substituted. Compensation payments which substitute income have been held by the courts to be income under ordinary concepts.
Taxation Determination TD 93/58 Income tax: under what circumstances is the receipt of a lump sum compensation/settlement payment assessable? explains the circumstances in which a lump sum compensation/settlement payment is assessable, and states that such a payment is assessable income:
● if the payment is compensation for loss of income only (even when the basis of the calculation of the lump sum cannot be determined), or
● to the extent that a portion of the lump sum payment is identifiable and quantifiable as income. This will be possible where the parties either expressly or impliedly agree that a certain portion of the payment relates to a loss of an income nature.
The loss of earnings grant is considered to be ordinary income as the amount has been paid and is based on your actual loss of income and is assessable under subsection 6-5(2) of the ITAA 1997.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
