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Edited version of your written advice
Authorisation Number: 1051324338255
Date of advice: 9 January 2018
Ruling
Subject: Assessability of lump sum compensation payment
Question 1
Will the amount or any portion thereof to be paid pursuant to section 33 and paragraph 54(1)(a) of the Return to Work Act 2014 (SA), be included in your assessable income?
Answer
No.
Question 2
Is the portion of the lump sum payment you received as a retraining allowance assessable as either ordinary income or as a capital gain?
Answer
No.
This ruling applies for the following period
Year ending 30 June 20XX.
The scheme commenced on
1 July 20XX.
Relevant facts
You sustained compensable disabilities said to have arisen while employed.
You made a claim for compensation pursuant to the RWA, which was accepted.
You will receive a redemption offer pursuant to section 33 and paragraph 54(1)(a) of the Return to Work Act 2014 (SA).
It was also found that you were entitled to a retraining allowance.
As part of the agreement you have to resign.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 15-30
Income Tax Assessment Act 1997 Section 118-37
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with receipts of ordinary income. It does not operate to include in assessable income amounts of a capital nature. The money to be received will be capital in nature and therefore not assessable income.
Additionally, as the criteria in subsection 82-135(i) of the ITAA 1997 is satisfied the payment is excluded from being an Eligible Termination Payment.
The other applicable sections, section 15-30 of the ITAA 1997 and the capital gains tax provisions of the ITAA 1997, also will not operate to make the payment assessable.
Therefore the payment you receive will not be included in your assessable income.
Retraining allowance
This portion of the lump sum is not a compensation payment and has not been paid for loss of earnings nor will it recur in the future.
The payment is a contribution towards a private expense and is not included in your assessable income.