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Edited version of private advice
Authorisation Number: 1051823767412
Date of advice: 8 April 2021
Ruling
Subject: Assessable income - lump sum compensation payment
Question 1
Will the lump sum payment you received for medical related expenses, pursuant to your state workers compensation legislation, be included in your assessable income?
Answer
No.
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with receipts of ordinary income. It does not operate to include in assessable income amounts of a capital nature. The payment you have received is capital in nature and therefore not assessable as ordinary income.
Additionally, as the criteria in subsection 82-135(i) of the ITAA 1997 is satisfied the payment is excluded from being an Employment Termination Payment.
The other applicable sections, section 15-30 of the ITAA 1997 and the capital gains tax provisions of the ITAA 1997, also will not operate to make the payment assessable.
Question 2
Will the amount paid as a contribution towards another expense that will be incurred as a result of your injury be included in your assessable income?
Answer
No.
This amount has not been paid for loss of earnings nor will it recur in the future.
You are not required to include the amount in your assessable income as it is neither ordinary income nor statutory income.
This ruling applies for the following period:
Financial year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You sustained compensable disabilities arisen from your employment.
You have received a lump sum amount paid pursuant to your state workers compensation legislation for medical related expenses. You have also received a one-off amount as a contribution towards another expense that will be incurred as a result of your injury.
You voluntarily resigned from your employment.
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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