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Edited version of your written advice
Authorisation Number: 1051200953638
Date of Advice: 17 March 2017
Ruling
Subject: assessability of insurance payout.
Question
Is the payout that you received from your trauma cover insurance policy taxable?
Answer
No.
This ruling applies for the following period(s)
Year ended 30 June 2017
The scheme commences on
1 July 2016
Relevant facts and circumstances
You received a payout from your insurance provider.
You received this payment as part of trauma insurance cover as you have a condition covered by this cover.
This amount is not part of a superannuation plan, nor is it to replace income as you hold separate income protection insurance.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-37
Reasons for decision
Section 118-37 of the Income tax Assessment Act 1997 (ITAA 1997) disregards a capital gain or capital loss made by an individual relating to compensation or damages received by that individual as a result of any wrong, injury or illness they or their relative suffered personally.
A receipt of an amount under an insurance policy for a non-death benefit such as total and permanent disablement or trauma constitutes a form of compensation or damages covered by subparagraph 118-37(1)(a)(ii) where the amount is received for a wrong, injury or illness suffered personally by the recipient or the recipient's relative.
You received a payment from a trauma cover policy. You are suffering an illness which is a medical condition covered under that trauma cover policy. Therefore the total amount received from that policy payout is disregarded for tax purposes under section 118-37 of the ITAA 1997.