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Edited version of private advice
Authorisation Number: 1051638488357
Date of advice: 03 March 2020
Ruling
Subject: Assessability of a lump sum compensation payment, money transferred from trustee
Question
Is the balance of the lump sum compensation payment you received to be included in your assessable income?
Answer
No
The payment is not assessable income as it retains its identity as a capital compensation payment for injury and is therefore exempt from taxation.
This ruling applies for the following periods:
30 June 2020
The scheme commences on:
1 July 2019
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 were involved in a workplace accident and received workers compensation and were unable to work for some months. Pay as You Go withholding on the payments were paid in the relevant income year.
A few years later you lodged a personal injury claim against the employer which was settled some years later by which time you were incarcerated.
After legal fees and reimbursement to the insurer for workers compensation payments were paid, you received a lump sum compensation payment. The payment did not include an on-going or future income loss component.
Due to your incarceration you were deemed to be under a legal disability and the Public Trustee received the payment to manage on your behalf.
From the time you received the payment the distributions from the payment which were paid to you by the Public Trustee, exceeded the revenue generated by the lump sum payment.
The Public Trustee later relinquished its right to manage your affairs and paid a sum of money into your bank account which was the remaining balance of your compensation payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
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