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Edited version of your written advice
Authorisation Number: 1012924973391
Date of advice: 10 December 2015
Ruling
Subject: Contract Early Termination Payment
The entity received a payment for the early termination of a contract.
Question 1
The ruling concerned whether a payment to the entity for the termination of a contract was assessable income for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997).
Answer
The Commissioner ruled that the payment was not assessable income according to ordinary concepts under section 6-5 of the ITAA 1997.
Question 2
The ruling concerned whether a payment to the entity for the termination of a contract was an assessable recoupment under section 20-20 of the ITAA 1997?
Answer
The Commissioner ruled that the payment was not an assessable recoupment under section 20-20 of the ITAA 1997.
Question 3
The ruling concerned whether a payment to the entity for the termination of a contract was a bounty or subsidy under section 15-10 of the ITAA 1997.
Answer
The Commissioner ruled that the payment was not a bounty or subsidy under section 15-10 of the ITAA 1997.
Question 4
The ruling concerned whether a payment to the entity for the termination of a contract was an indemnity for loss of assessable income under section 15-30 of the ITAA 1997.
Answer
The Commissioner ruled that the payment was not an indemnity for loss of assessable income under section 15-30 of the ITAA 1997.
Question 5
The ruling concerned whether a payment to the entity for the termination of a contract will be included in a balancing adjustment under Division 40 of the ITAA 1997.
Answer
The Commissioner ruled that the payment is not included in a balancing adjustment under Division 40 of the ITAA 1997.
Question 6
The ruling concerned whether a payment to the entity for the termination of a contract is capital proceeds for the purposes of a CGT event.
Answer
The Commissioner ruled that the payment is capital proceeds for the purposes of a CGT event C2 under section 104-25 of the ITAA 1997.