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Edited version of private advice
Authorisation Number: 1051514696735
Date of advice: 8 May 2019
Ruling
Subject: Income tax- assessable income
Question
Is a lump sum paid as a result of trauma recovery benefit claim non-assessable income?
Answer
Yes.
We agree the payment of Trauma Recovery Benefit from your insurer is not ordinary or statutory income, therefore it is non-assessable income. As the payment was received for an injury or illness you suffered personally, any capital gain or loss is disregarded.
This ruling applies for the following periods:
Year ending 30 June 20XX
The scheme commences on:
XX 20XX
Relevant facts and circumstances
You were diagnosed with a serious illness.
You have an insurance policy that covers Life Cover with Trauma and Total Permanent Disability Cover and Income Secure Cover.
Your policy provides a Trauma Recovery Option which means that you are entitled to six months benefit regardless of whether you return to work.
The Trauma Recovery Benefit is payable upon the date of diagnosis and payable even if you are not disabled.
You received payment under the Trauma Recovery Benefit on XX.
You took time off work for treatment, using your accumulated sick leave entitlements. Your sick leave was taken from XX to XX. Tax has been withheld from these payments and a PAYG summary was received for the XX financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-15
Income Tax Assessment Act 1997 section 10-5
Income Tax Assessment Act 1997 paragraph 118-37(1)(b)
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