| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012046615892
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Income arrears payment
Question
Are you assessable on a lump sum arrears payment made under a superannuation income protection policy in the financial year you received it?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 2011
The scheme commences on
1 July 2010
Relevant facts and circumstances
You sustained a workplace injury.
You took legal action to claim income protection benefits through your superannuation group policy.
You were paid a lump sum payment, which accrued in prior financial years.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tx Assessment Act 1997 Subsection 6-5(2)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Income protection policies provide for periodic payments in the event of loss of income caused by the insured becoming disabled through sickness or injury. These payments are assessable as income under section 6-5 of the ITAA 1997, as they are paid to take the place of lost earnings.
An amount received as a lump sum representing arrears of monthly compensation payments is classified as ordinary income and is assessable in the year received. This is the case even though the payment relates to earlier income years.
In your case, the amount you received represents a back-payment of periodic income protection payments. The lump sum amount you received is a payment of loss of income and so is fully assessable when received.
As the lump sum payment was actually received in the 2010-11 financial year, the amount is assessable in full in that income year.