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Edited version of your written advice
Authorisation Number: 1012800521451
Ruling
Subject: Income - workers compensation
Question 1
Are the periodic worker's compensation payments you are receiving taxable income?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
The scheme commences on:
November 20XX
Relevant facts and circumstances
You suffered a workplace injury.
You have been receiving periodic workers' compensation payments since November 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Subsection 6-5(1) of the Income Taxation Assessment Act 1997 (ITAA 1997) provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income.
Income according to ordinary concepts has been held by the courts to include income from the rendering of personal services, income from property and income from carrying on of a business.
Other characteristics of income that have evolved from case law include receipts that:
• are earned
• are expected
• are relied upon, and
• have an element of periodicity, recurrence or regularity.
An amount paid to compensate for loss generally acquires the character of that for which it is substituted.
Compensation payments which substitute income have been held by the courts to be income under ordinary concepts.
In your case, you are in receipt of a periodic workers compensation payment as the result of a workers compensation claim for a workplace injury.
It is considered the payment meets all of the above characteristics of income and that the payment is in substitution for your regular wage income.
Consequently the compensation payments are assessable as ordinary income.