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Edited version of private ruling
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Ruling
Subject: Income protection policy
Question and answer
Are the income protection policy payment included on your tax return in the year in which you received them?
Yes
This ruling applies for the following period
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commenced on
1 July 2008
The scheme that is the subject of this ruling
You receive payments under an income protection policy.
The payments are being made for a claim relating to illness.
While the insurance company was conducting its investigations you were receiving payments at irregular intervals.
You are now receiving payments at regular intervals.
You have been provided with a letter detailing dates payments were made and the periods to which these payments relate.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Explanation (This does not form part of the ruling)
Taxation Ruling TR 98/1 considers the appropriate method of determining when income is derived under section 6-5 of the Income Tax Assessment Act 1997. Paragraph 42 of TR 98/1 states income that is salary, wages or other employment remuneration are assessable when the income is received even though they relate to a past or future income period.
Payments made under an income protection plan are deemed to be treated like salary and wage income as that is what the payment replaces.
Therefore you should include the income in the year in which you receive it.