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Edited version of your written advice
Authorisation Number: 1012702428299
Ruling
Subject: Insurance payment
Question
Is the payment you received assessable income?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts
You were involved in an accident on your way home from work.
Under your union membership, you were entitled to payment for the full amount of salary and wages you did not receive for the period you were unable to work.
No payment was received in relation to medical expenses.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5(2)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 provides that the assessable income of an Australian resident includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Based on case law, it can be said that ordinary income generally includes receipts that:
• are earned
• are expected
• are relied upon, and
• have an element of periodicity, recurrence or regularity.
Payments of salary and wages are income according to ordinary concepts and are included in assessable income.
An amount paid to compensate for loss generally acquires the character of that for which it is substituted (FC of T v. Dixon (1952) 86 CLR 540; (1952) 5 ATR 443;10 ATD 82). Compensation payments which substitute income have been held by the courts to be income according to ordinary concepts (FC of T v. Inkster 89 ATC 5142; (1989) 20 ATR 1516 and Tinkler v. FC of T 79 ATC 4641; (1979) 10 ATR 411).
In your case, you suffered an injury and received benefits under a policy provided by your union. This policy was to provide income in the event of a work journey accident. The payments paid under the policy are income according to ordinary concepts. Accordingly, the amount you received under the policy is assessable.