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Edited version of your private ruling
Authorisation Number: 1012620927424
Ruling
Subject: Repayment of partial and permanent disability benefit
Question
Are the amounts representing partial and permanent disability benefits received by your client in the 2011-12 and 2012-13 income years respectively and repaid by your client to your client's employer in the 2013-14 income year to be excluded from your client's assessable income in those earlier income years?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commenced on
1 July 2011
Relevant facts and circumstances
Your client was an employee of the employer.
Your client retired from the employer on medical grounds in the 2011-12 income year and received partial and permanent disability (PPD) benefits from the employer in the 2011-12 and 2012-13 income years:
Your client subsequently applied for, and was granted, a total and permanent disability (TPD) benefit from your client's superannuation fund (the Fund). The TPD benefit was paid in the 2013-14 income year.
In order to receive the TPD benefit, your client had to repay the gross PPD benefits (the amount) previously received to the employer.
Your client repaid the amount to the employer during the 2013-14 income year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 59-30(1).
Income Tax Assessment Act 1997 Subsection 59-30(2).
Reasons for decision
Summary
The amount received as a PPD benefit from the employer in the 2011-12 and 2012-13 income years and subsequently repaid in the 2013-14 income year is not assessable income and not exempt income in the hands of your client.
Detailed reasoning
Subsection 59-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that:
An amount you receive is not assessable income and is not exempt income for an income year if:
(a) you must repay it; and
(b) you repay it in a later income year; and
(c) you cannot deduct the repayment for any income year.
It is further stated in subsection 59-30(2) of the ITAA 1997 that:
It does not matter if:
(a) you received the amount as part of a larger amount; or
(b) the obligation to repay existed when you received the amount or it came into existence later.
In this particular case, it is evident that your client repaid the entire amount to the employer in the 2013-14 income year. Therefore section 59-30 of the ITAA 1997 applies to exclude the amounts of your client's PPD from assessable income for the 2011-12 and 2012-13 income years.
It is noted that the overpayments in question were not included as assessable income for the 2011-12 and 2012-13 income years. Both assessments were issued on late March 2014.
In order for the refund of tax withheld, it is recommended that you request amendment for the relevant income years. Please attach a copy of this notice of decision when requesting the amendment.