| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051237537871
Date of advice: 20 June 2017
Ruling
Subject: Income protection payment
Question and answer
Is the lump sum amount received by you to replace monthly income protection payments assessable income?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2016
The scheme commenced on:
1 July 2015
Relevant facts and circumstances
You were receiving monthly income protection payments.
You agreed to receive a lump sum payment in lieu of the monthly payments.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 6-5(2)
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 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.
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).
You agreed to receive a lump sum payment in lieu of monthly income protection payments.
The income protection payment is compensation relating to loss of income and is assessable.
This payment forms part of your assessable income in the year it is derived and must be included in your tax return.