Edited version of your written advice

Authorisation Number: 1051224562822

Date of advice: 18 May 2017

Ruling - Income Tax Issues

Subject: Mining compensation payments

Question 1

Will the compensation payments to be received be assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 ('ITAA 1997')?

Answer

No

Question 2

Will the compensation payments to be received represent the capital proceeds of a capital gains tax ('CGT') event in Division 104 of the ITAA 1997?

Answer

No

Question 3

Will the compensation payments to be received reduce the cost base of the post-CGT land under sections 110-40 or 110-45 of the ITAA 1997?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

Year ended 30 June 2020

The scheme commences on:

1 July 2016

Background

X and Y ('Landowners') are farmers and jointly own the land in State X ('Relevant Land'). The Relevant Land is a post CGT asset.

The Relevant Land is predominantly valuable pasture used for dairy cattle grazing and the production of high quality fodder. The pasture areas are cultivated and flat, and part of its value comes from those characteristics, which makes it very suitable for dairy cattle grazing.

Proposed mining activities

The Miner is a miner of sands in State X. It currently holds the Mining Tenements granted under the the Mining Act 1978 (XX) ('Mining Act').

A mining proposal ('Mining Proposal') submitted by the Miner to the Department of Mines and Petroleum sets out the mining activities that are to be undertaken on the land subject to the mining leases.

It proposes to extract Z from the strand of heavy mineral deposit, known as the (mining activities'). It is located within Mining Tenements, which is located in and adjacent to the Relevant Land in State X. It also includes the rehabilitation and decommissioning of the mining activities.

The mining activities have a total disturbance envelope of XXX hectares. Of this area, XX hectares is located within previously cleared land currently used for farming activities (i.e. agriculture/pasture) and X hectares is located within State Forest (managed by the Department of Parks and Wildlife), which has previously undergone partial clearing and has since revegetated (excluding an area of X hectares which remains cleared).

The mining tenements cover a portion of the Relevant Land.

The mine operations are summarised as follows:

(a) The Miner intends to commence mining in mid-20WW, with the pre-mining phase (including the removal of overburden) commencing in early 20WW.

(b) The Miner anticipates that the operational mine life will be three years and that rehabilitation following mining may take up to five years.

(c) The pre-mine establishment phase includes drainage, clearing, stripping, the installation of production bores and associated water infrastructure and the construction of other infrastructure and buildings necessary.

(d) During the mining phase, Z will be mined progressively via a series of open-cut pits using dry mining techniques.

(e) Overburden and Z will be mined to depths of up to XY metres below ground level.

(f) Processing of the Z will commence on site.

(g) Heavy mineral concentrate will be stockpiled on site and then transported to an off-site plant for final processing before export.

(h) Rehabilitation will occur progressively where possible throughout the course of the mining phase.

(i) Mine closure may take up to five years following the completion of mining.

The Mining Act 1978 (XX)

Subsection 29(7) of the Mining Act states:

A mining tenement granted under this Division in respect of private land -

(a) shall, subject to this Act, authorise the holder of that mining tenement -

(i) to carry out mining on the natural surface of the private land and at any depth there under; or

(ii) to carry out mining at a depth of not less than 30 metres from the lowest part of the natural surface of the private land;…

Section 35 of the Mining Act states:

The holder of a mining tenement shall not commence any mining on the natural surface or within a depth of 30 metres from the lowest part of the natural surface of any private land unless and until he has paid or tendered to the owner and the occupier thereof the amount of compensation, if any, that he is required to pay under and as ascertained in accordance with this Act, or he has made an agreement with the owner and occupier as to the amount, times and mode of the compensation, if any.

The Mining Act defines mining in subsection 8(1) as:

includes fossicking, prospecting and exploring for minerals, and mining operations

The Mining Act defines mining operations in subsection 8(1) as:

mining operations means any mode or method of working whereby the earth or any rock structure stone fluid or mineral bearing substance may be disturbed removed washed sifted crushed leached roasted distilled evaporated smelted or refined or dealt with for the purpose of obtaining any mineral therefrom whether it has been previously disturbed or not and includes:

(a) the removal of overburden by mechanical or other means and the stacking, deposit, storage and treatment of any substance considered to contain any mineral;

(b) operations by means of which salt or other evaporites may be harvested;

(c) operations by means of which mineral is recovered from the sea or a natural water supply; and

(d) the doing of all lawful acts incident or conducive to any such operation or purposes;

Subsection 84(1) of the Mining Act states:

On the granting of a mining lease, or at any subsequent time, the Minister may impose on the lessee reasonable conditions for the purpose of preventing or reducing, or making good, injury to the natural surface of the land in respect of which the lease is sought or was granted, or injury to anything on the natural surface of that land or consequential damage to any other land.

Subsection 85(1) of the Mining Act states:

Subject to this Act and any other conditions to which the mining lease is subject, a mining lease authorises the lessee thereof and his agents and employees on his behalf to:

(a) work and mine the land in respect of which the lease was granted for any minerals;

(b) take and remove from the land any minerals and dispose of them;

(c) take and divert (subject to the Rights in Water and Irrigation Act 1914, or any Act amending or replacing that Act) water from any natural spring, lake, pool or stream in or flowing through the land, and to sink a well or bore on the land and to use the water so taken for domestic purposes and for any purpose in connection with mining for minerals on the land; and

(d) do all acts and things that are necessary to effectually carry out mining operations in, on or under the land.

Subsection 85(2) of the Mining Act states:

Subject to this Act and to any conditions to which the mining lease is subject, the lessee of a mining lease:

(a) is entitled to use, occupy, and enjoy the land in respect of which the mining lease was granted for mining purposes; and

(b) owns all minerals lawfully mined from the land under the mining lease.

Subsection 123(1) of the Mining Act states:

On and after the coming into operation of the Mining Amendment Act 1985, in so far as the mineral is by virtue of section 9 the property of the Crown or the mining is authorised under this Act no compensation shall be payable in any case, and no claim lies for compensation, whether under this Act or otherwise:

(a) in consideration of permitting entry on to any land for mining purposes;

(b) in respect of the value of any mineral which is or may be in, on or under the surface of any land;

(c) by reference to any rent, royalty or other amount assessed in respect of the mining of the mineral; or

(d) in relation to any loss or damage for which compensation can not be assessed according to common law principles in monetary terms.

Subsection 123(2) of the Mining Act states:

Subject to this section and to sections 124 and 125, the owner and occupier of any land where mining takes place are entitled according to their respective interests to compensation for all loss and damage suffered or likely to be suffered by them resulting or arising from the mining, whether or not lawfully carried out in accordance with this Act, and a person mining thereon is liable to pay compensation in accordance with this Act for any such loss or damage, or likely loss or damage, resulting from any act or omission on his part or on the part of his agents, sub-contractors or employees or otherwise occasioned with his authority.

Subsection 123(3) of the Mining Act states:

The amount of compensation payable to the owner of private land or to an occupier of Crown land or private land may be determined by agreement, but in default of agreement:

(a) if the owner or occupier, respectively, and the person liable for payment of the compensation so consent, may be determined by the warden's court, without requiring any formal proceedings to be taken, pursuant to a claim lodged at the office of the mining registrar and made in the prescribed manner; and

(b) in any other case, shall be determined by the warden's court in formal proceedings, upon the application of the owner, the occupier or the person liable for the payment of the compensation.

Subsection 123(4) of the Mining Act states:

Subject to subsection (1) and subsection (7) and taking into account the matters referred to in section 124 and section 125, the amount payable under subsection (2) to which an owner or occupier may be found to be entitled may include compensation for:

(a) being deprived of the possession or use, or any particular use, of the natural surface of the land or any part of the land;

(b) damage to the natural surface of the land or any part of the land;

(c) severance of the land or any part of the land from other land of, or used by, that person;

(d) any loss or restriction of a right of way or other easement or right;

(e) the loss of, or damage to, improvements;

(f) social disruption;

(g) in the case of private land that is land under cultivation, any substantial loss of earnings, delay, loss of time, reasonable legal or other costs of negotiation, disruption to agricultural activities, disturbance of the balance of the agricultural holding, the failure on the part of a person concerned in the mining to observe the same laws or requirements in relation to that land as regards the spread of weeds, pests, disease, fire or erosion, or as to soil conservation practices, as are observed by the owner or occupier of that land; and

(h) any reasonable expense properly arising from the need to reduce or control the damage resulting or arising from the mining,…

Subsection 123(5) of the Mining Act states:

If any private land or improvement thereon adjoining or in the vicinity of land where mining takes place is injured or depreciated in value by the mining or by reason of the occupation of any portion of the surface or enjoyment by the holder of a mining tenement or of any right of way, the owner and occupier of the private land or improvements thereon are entitled severally to compensation for all loss or damage thereby sustained and the amount of compensation shall be determined in the manner provided in this section.

There is no definition of the term “compensation” in the Mining Act.

Effect of mining on the land

The Landowners believe that the Relevant Land will suffer one or more of the following occurrences as a result of the mining activities set out in the Mining Proposal:

(a) subsidence (causing the subsided parts to become waterlogged and unsuitable for grazing);

(b) erosion;

(c) changes to soil topography, permeability and chemistry;

(d) changes to surface water / groundwater pathways;

(e) acidification of groundwater; and

(f) increased radiation levels, causing significant permanent damage to the land.

There is also the potential for ongoing changes to the groundwater availability and chemistry on the Relevant Land due to the mining activities.

Compensation Agreement

The Landowners and the Miner entered into a Compensation Agreement, whereby the Miner will compensate the Landowners for:

(a) all mining activities described in the Mining Proposal, as well as the Mining of any area outside the Tenements (Disclosed Activities); and

(b) the permanent damage or permanent reduction in value of the Relevant Land.

In subclause X of the Compensation Agreement, the Miner acknowledges and agrees that the Landowners reserves the right to claim compensation for mining activities that are not Disclosed Activities.

Pursuant to clause X of the Compensation Agreement, the Miner will pay to the Landowners the sum of $XXX (exclusive of GST) in compensation by the following instalments:

1. $XX within 5 business days of the date of the compensation agreement;

2. $XX within 5 business days after the Miner has received all necessary approvals for their activities on the Relevant Land;

3. $XX within 5 business days after the date of commencement of mining operations on the Relevant Land; and

4. $XX within 5 business days after the date that is 12 months after the commencement of the mining operations on the Relevant Land.

GST registration

The Landowners are not registered for GST individually.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 160ZH

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Subsection 20-25(1)

Income Tax Assessment Act 1997 Section 102-5

Income Tax Assessment Act 1997 Section 104-25

Income Tax Assessment Act 1997 Section 110-45

Income Tax Assessment Act 1997 Section 108-5

Income Tax Assessment Act 1997 Subsection 116-20(1)

Income Tax Assessment Act 1997 Section 118-20

Income Tax Assessment Act 1997 Paragraph 118-37(1)(c)

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1997

Income Tax Assessment Act 1936 Section 6(1)

Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 (assent 14/09/2006)

Reasons for decision

Question 1

Summary

The compensation payments to be received by the taxpayer under their Compensation Agreement with the Miner do not give rise to income according to ordinary concepts.

Detailed reasoning

Section 6-5 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

There is no definition of 'ordinary income' in the tax law. The courts however have established the following principles to determine if an amount is ordinary income:

i) it must be determined in accordance with ordinary concepts and usages, except where statute provides otherwise;

ii) it depends on a close examination of all relevant circumstances; and

iii) it is an objective test.

No one factor is decisive and each situation must be examined to determine if the particular payment can be characterised as income according to ordinary concepts.

Periodicity or regularity of payment is a common characteristic of income receipts, even where the receipts are not directly referrable to employment or services rendered (Commissioner of Taxation v. Citibank (1993) 44 FCR 434; 93 ATC 4691;(1993) 26 ATR 557).

Capital gains are not ordinary income in the hands of the recipient however they may still be assessable statutory income under section 6-10.

In G.P. International Pipecoaters Pty. Ltd. v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 the High Court stated that:

To determine whether a receipt is of an income or a capital nature, various factors may be relevant. Sometimes, the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business.

The character of the receipt in the hands of the recipient must be determined. It is in this context that the character of the payment is determined. If the payments are periodical, the question becomes, are the payments instalments of the capital amount or really in the nature of income. 

The case Barrett v Federal Commissioner of Taxation (1968) 118 CLR 666; (1968) 15 ATD 149; (1968) 10 AITR 685 concluded the periodic nature of the compensation payments did not convert them into a revenue amount. Barrett was the owner of a farming property under which lay deposits of soapstone. The right to mine soapstone was exercised on Barrett's land. Barrett received an amount of money to compensate for damage to and loss of value to the land and inconvenience to Barrett. Mining operations were carried out on the land for a number of years, and the mining company paid the taxpayer by monthly instalments an amount calculated based on the amount of soap stone removed from the land during the year. The High Court ruled the payments were made and received for the purpose of making good the estimated diminution in value of the land and the amount of damage to it resulting from the carrying on of mining operations, and were therefore of a capital nature.

Taxation Determination TD 93/58 - Income tax: under what circumstances is the receipt of a lump sum compensation/settlement payment assessable? considers under what circumstances the receipt of a lump sum compensation/settlement payment is assessable. It indicates that a compensation amount will be assessable:

(a) if the payment is compensation for loss of income only e.g. past year profits, and/or interest; or

(b) to the extent that a portion of the lump sum payment is identifiable and quantifiable as income. This will be possible where the parties either expressly or impliedly agree that a certain portion of the payment relates to a loss of an income nature.

Further, Taxation Ruling TR 95/35 - Income Tax: capital gains: treatment of compensation receipts considers the tax treatment of compensation receipts. A compensation receipt, or compensation, includes any amount (whatever money or other property), received by a taxpayer in respect of a right to seek compensation or a cause of action, or any proceeding instituted by the taxpayer in respect of that right or cause of action, whether or not, in relation to any underlying asset; arising out of court proceedings; or made up of dissected amounts (paragraph 3).

Compensation paid due to loss and damage of a capital asset, or forgoing a right to sue, in the process of a mining authority entering and accessing minerals and resources, is an isolated transaction. Whether a profit from an isolated transaction is ordinary assessable income according to the ordinary concepts depends very much on the circumstances of the case. Profit from an isolated transaction is generally ordinary income when both of the following elements are present:

(a) The intention or purpose of the taxpayer in entering into the transaction was to make a profit or gain; and the transaction was entered into, and

(b) The profit was made, in the course of carrying on a business or in carrying out a business operation or commercial transaction (paragraph 6 Taxation Ruling TR 92/3).

Application to your circumstance

The Mining Act establishes a statutory scheme to provide compensation to landowners for the impact of mining activities; and requires the miner to pay compensation or enter into an agreement to pay compensation. The purpose of the scheme is to ensure that landowners are not financially disadvantaged by mining activities carried out on their property. Landowners are entitled to compensation for any compensable effects related to the impact of the activities on their business operations and land use.

The Commissioner is satisfied that the taxpayer is entitled to compensation under section 123(2) of the Mining Act in relation to the land subject to the mining leases, as it is directly affected by the mining activities.

It is determined that the compensation payments to be received from the Miner are not profits from an isolated transaction, because the taxpayer does not intend to make profit from the transaction. More importantly, they are not made in the course of carrying on a business or in carrying out a business operation or commercial transaction (paragraph 6 of Taxation Ruling TR 92/3).

The compensation payment the taxpayer will receive from the Miner will likewise be compensation for damage to property forming part of the profit-yielding structure of those landholders and a matter of capital.

Accordingly, the compensation payments do not give rise to income according to ordinary concepts pursuant to section 6-5(1).

Questions 2 and 3

Summary

The compensation payments to be received by the taxpayer under their Compensation Agreement with the Miner do not represent the capital proceeds of a CGT event in Division 104 ('capital proceeds'). The relevant CGT asset is the taxpayer's interest on land, not the right to seek compensation. No CGT event occurs in respect of the taxpayer's interest in land.

Such compensation payments will reduce the cost base of the post-CGT land under sections 110-40 or 110-45.

Detailed Reasoning

Under section 6-10, some amounts that are not 'ordinary income' are included in a taxpayer's assessable income due to other provisions of the tax law. These amounts are 'statutory income'. Statutory income may arise from CGT events, which may occur as a result of a taxpayer disposing of their right to receive compensation, or the loss or destruction of a CGT asset.

As mentioned above, TR 95/35 considers the CGT consequences for a taxpayer who has received a compensation payment and specifically looks at whether the amount should be included in the assessable income of the recipient under the former Part IIIA of the ITAA 1936. It states that compensation received may be attributed from:

● Disposal of an underlying asset;

● Permanent damage to, or permanent reduction in the value of the underlying asset;

● Excessive consideration to acquire an asset;

● Right to seek compensation;

● Disposal of a notional asset.

Since there is no acquisition or disposal of asset, the only relevant factors would be whether such compensation payments are attributed from taxpayer's right to seek compensation or permanent damage to / permanent reduction in the value of the underlying asset.

If the compensation payments relate to the former, it would represent capital proceeds. If it is latter, it would be treated as a recoupment of all or part of the acquisition cost of the asset (that is, the cost base or reduced cost base would be reduced by by the amount of the compensation).

Right to seek compensation

A right to seek compensation is defined in paragraph 3 of the TR 95/35 as:

● the right of action arising at law or in equity and vesting in the taxpayer on the occurrence of any breach of contract, personal injury or other compensable damage or injury;

● an asset for the purposes of Part IIIA;

● being acquired at the time of the compensable wrong or injury, and includes all of the rights arising during the process of pursuing the compensation claim; and

● being disposed of when it is satisfied, surrendered, released or discharged.

For the disposal of the right to receive compensation, the relevant CGT event is CGT event C2 under section 104-25. It happens where a taxpayer's ownership of an intangible CGT asset ends by the asset:

(a) being redeemed or cancelled; or

(b) being released, discharged or satisfied; or

(c) expiring; or

(d) being abandoned, surrendered or forfeited; or

(e) if the asset is an option being exercised; or

(f) if the asset is a convertible interest being converted.

The right to be compensated for the specified activities is classified as an intangible CGT asset. A capital gain from CGT event C2 will arise if the capital proceeds from the ending are more than the right's cost base: subsection 104-25(3).

Capital proceeds (from a CGT event) are defined in subsection 116-20(1) as:

(a) the money you have received, or are entitled to receive, in respect of the event happening; and

(b) the market value of any other property you have received, or are entitled to receive, in respect of the event happening (worked out as at the time of the event).

According to the ruling, if the compensation payments relate to the disposal by the taxpayer of the right to seek compensation, any capital gain arising on the disposal of that right is calculated using the cost base of that right (paragraph 11 of the TR 95/35).

The cost base of the right to seek compensation is determined in accordance with the provisions of section 160ZH of the ITAA 1936¹. The consideration in respect of the acquisition of the right to seek compensation, for the purposes of paragraph 160ZH(1)(a) of the ITAA 1936², includes the total acquisition costs incurred as a result of which the right to seek compensation arose (paragraph 12 of the TR 95/35).

Compensation for permanent damage to or permanent reduction in the value of the underlying asset

Paragraphs 6 to 9 of the TR 95/35 allows the Commissioner to treat compensation for the permanent reduction in value of the underlying asset as a recoupment of some of the acquisition costs of the asset and not as capital proceeds for CGT event C2. Therefore there are no CGT consequences in respect of the compensation payments.

Specifically, paragraph 3 of the TR 95/35 provides the following definitions:

Underlying asset

The underlying asset is the asset that, using the 'look-through' approach, is disposed of or has suffered permanent damage or has been permanently reduced in value because of some act, happening, transaction, occurrence or event which has resulted in a right to seek compensation from the person or entity causing that damage or loss in value or against any other person or entity.

If there is more than one underlying asset, the relevant underlying asset is the asset which leads directly to the payment of the amount of compensation.

Permanent damage or reduction in value

Permanent damage or reduction in value does not mean everlasting damage or reduced value, but refers to damage or a reduction in value which will have permanent effect unless some action is taken by the taxpayer to put it right.

Look-through approach

The look-through approach is the process of identifying the most relevant asset. It requires an analysis of all of the possible assets of the taxpayer in order to determine the asset to which the compensation amount is most directly related. It is also referred to in this Ruling as the underlying asset approach.

Therefore, the CGT consequences of compensation payments depends on whether there is an underlying asset that payments have a direct and substantial link 'by looking through the transaction that gave rise to the compensation receipt to the most relevant asset relating to the receipt' (paragraph 76 of the TR 95/35).

In Carborundum Realty Pty Ltd v. RAIA Archicentre Pty Ltd and Graeme McDonald 93 ATC 4418; (1993) 25 ATR 192, Harper J suggested that the compensation receipt should be linked to the underlying asset in determining whether the plaintiff had received any capital gain.

If the compensation payments relate to permanent damage or reduction in the value of an underlying asset, the payments should be treated as a recoupment³ of all or part of the acquisition cost of the asset (that is, the cost base or reduced cost base would be reduced by by the amount of the compensation) (paragraph 6 of TR 95/35).

Sections 110-40 and 110-45 prevent some expenditure from forming part of the cost base of an asset for the purpose of determining a CGT liability. Specifically, subsection 110-45(3) states that expenditure that has been recouped does not form part of an asset's cost base, and so each taxpayers cost base for their interest in the asset is reduced by the amount of compensation received.

No capital gain or loss arises in respect of that asset until the taxpayer actually disposes of the underlying asset.

If, in the case of a post-CGT underlying asset, unless the compensation amount exceeds the total unindexed acquisition (including a deemed cost base) of the underlying asset, there are no CGT consequences in respect of the excess compensation amount (paragraph 7 of the TR 95/35).

For example, where there is an upfront lump sum payment paid by the statutory authority party to the claimant in relation to clearing land and the constructing of a dam. The consideration received is treated in respect of the underlying asset, the land. The cost base of the land is reduced to the extent of the consideration and any gain or loss will crystallise at the later time when the land is sold.

Compensation received by a taxpayer has no CGT consequences, if the underlying asset that has suffered permanent damage or reduction in value was acquired by the taxpayer before 20 September 1985 or is any other exempt CGT asset (paragraph 9 of the TR 95/35).

Application to your circumstances

The compensation agreements consist of an upfront payment and future ongoing payments.

In order to determine whether the compensation payments potentially relates to either the underlying asset (the land) or the right to receive compensation provided by the compensation agreement, the Commissioner must consider the factors contained in TR 95/35.

The ruling states that if the amount of compensation is not received wholly in respect of any underlying asset, the amount relates to the disposal by the taxpayer of the right to seek compensation (paragraph 11 of TR 95/35).

As determined above, the Commissioner is satisfied that the taxpayer is entitled to compensation under section 123(2) of the Mining Act in relation to the taxpayer's interest in land as it is likely to suffer permanent damage or reduction in value as a result of the mining activities.

It demonstrates that there is a direct and substantial link between the compensation and the taxpayer's interest in land, because the compensation payments will be made to the taxpayer in relation to the permanent damage or permanent reduction in value of their capital assets, being the taxpayer's interest in land. Thus the CGT asset is the relevant land (the underlying asset), not the right to seek compensation.

In light of this, it is it is considered that the compensation payments for the taxpayer's post CGT land are not capital proceeds from CGT event C2. There will be no CGT consequences for the land acquired prior to 20 September 1985.

As such, the compensation payments (for the post CGT land) are treated as recoupment of all or part of the acquisition cost of the taxpayer's interest in land. The taxpayer will need to apply the amount of the compensation to reduce the cost base and reduced cost base of the relevant land.

¹ Repealed by Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 (assent 14/09/2006); Replaced by sections 104-30 to 104-45108-17, 108-30, 110-25 to 110-60, and 112-25 of the ITAA 1997

² Replaced by sections 108-17, 108-30 and 110-25 of the ITAA 1997

³ Recoupment of a loss or outgoing is defined in subsection 20-25(1) as any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery, however described; and grant in respect of the loss or outgoing