| Disclaimer This edited version has been archived due to the length of time since original publication.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 private advice
Authorisation Number: 1051571379026
Date of advice: 23 August 2019
Ruling
Subject: Total and Permanent Disability benefit - lump sum compensation
Question
Is the lump sum payment received for Total Permanent Disability (TPD) assessable as ordinary income under section 6-5(2) of the Income Assessment Act 1997 (ITAA 1997)?
Answer
No. The payment you received from the insurer is not being made to compensate you for the loss of earnings. Rather it is a one-off, lump sum amount to compensate you for the illness you suffer. Thus, this payment does not meet the ordinary income requirements under section 6-5 of the ITAA 1997 and is not an assessable income. It is also exempt from capital gain under subparagraph 118-37(1)(a)(ii) of the ITAA 1997.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You worked in the same occupation for several years.
Before the relevant year, you ceased work as a result of an injury that left you unable to work again in your capacity or any other forms of physical labour.
You continue to receive treatment for your injury.
For several years, you had held a life insurance policy with Insurer A with a Total and Permanent Disability (TPD) component.
Before the relevant year, you lodged a claim with Insurer A for TPD benefit and underwent medical examination.
Your claim was accepted during the relevant year and you provided the amount of your benefit payable.
You have provided relevant details of the policy.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 118-37
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).
