| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012523633454
Ruling
Subject: Compensation payment - interest - assessable
Question:
Is the interest derived on the investment of your future medical component of your compensation payments exempt from income tax?
Answer:
No.
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commenced on:
1 July 2010
Relevant facts:
You sustained a personal injury as a result a car accident.
You commenced legal proceedings and subsequently settled your claim.
You received compensation as a result of finalising your claim.
The amount of the compensation received was for various components, including future medical expenses.
You have invested the compensation payment and receive interest
You require surgery and intend to use some of the compensation payment to pay for the procedure.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5
Reasons for decision:
The assessable income of a taxpayer includes income according to ordinary concepts.
Characteristics of income that have evolved from case law include receipts that:
· are earned,
· are expected,
· are relied upon,
· have an element of periodicity, recurrence or regularity.
Interest income is an example of ordinary income as it is expected, relied on and has an element of periodicity, recurrence or regularity.
In your case, you received a lump sum payment to compensate you for your injury and any interest income that you derive as a result of investing the amount will be deemed to be ordinary income and assessable in the year in which it is derived.
We acknowledge your particular personal circumstances; however the Commissioner of Taxation has no discretion or power to exempt individual taxpayers from paying tax where the law says it must be paid.