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Edited version of your written advice
Authorisation Number: 1051485913609
Date of advice: 11 April 2019
Ruling
Subject: Lump sum payments made under Section 56 and 58 of the Return to Work Act 2014 (South Australia).
Question
Is the lump sum payment you received or any portion thereof pursuant to sections 56 and 58 of the Return to Work Act 2014 (X) (RWA) assessable as either ordinary income or as a capital gain?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
● You sustained an injury in a work incident.
● You made a claim for compensation pursuant to the RWA, which was accepted.
● In accordance with Part 2 Division 5 of the RWA you have been assessed as having 13% whole person impairment (WPI).
● As the injury resulted in you having a degree of permanent physical impairment, you were entitled to two lump sum payments pursuant to sections 56 and 58 of the RWA.
● Section 56 of the RWA provides an entitlement to a lump sum payment for loss of future earning capacity for a worker (other than a seriously injured worker) who has been assessed as suffering a degree of WPI (between 5% and 29%) as a result of their work injury, subject to certain exceptions.
● The lump sum is determined according to a formula set out in subsection 56(4) of the RWA. The calculation takes into account the prescribed sum that applies to the injured worker’s degree of WPI, their age and the proportion of full-time work performed at the time of the injury.
● Section 58 of the RWA provides an entitlement to a lump sum payment for non-economic loss for a worker who has been assessed as suffering 5% or more WPI as a result of their work injury, subject to certain exceptions
● Subsection 58(4) of the RWA states that the lump sum will be an amount that represents a portion of the prescribed sum calculated in accordance with the regulations.
Non-economic loss is defined in the RWA as:
● pain and suffering
● loss of amenities of life
● loss of expectation of life
● disfigurement
● any other loss or detriment of non-economic nature.
● You were offered a dissected lump sum, in settlement of your entitlement pursuant to sections 56 and 58 of the RWA.
● The employer is a self-insured employer within the meaning of the RWA and you have provided a copy of a letter from their insurer detailing the claim, permanent impairment assessment offer and decision.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 section 104-25
Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(i)
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