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Edited version of your written advice
Authorisation Number: 1051397075732
Date of advice: 19 July 2018
Ruling
Subject: Lump sum insurance payment
Question
Is the lump sum payment received under your insurance policy assessable as either ordinary income or as a capital gain?
Answer
No, the lump sum payment you received for your injury is not assessable under subsection 6-5(2) of the ITAA 1997 as it is not ordinary income. The lump sum is also disregarded from the CGT provisions by the operation of Section 118-37(1)(b) of the ITAA 1997.
Subsection 6-15(1) of the ITAA 1997 provides that if an amount is not ordinary or statutory income it is not assessable income. Therefore no part of your insurance benefit is included in your assessable income.
This ruling applies for the following period
Year ending 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
You ceased work due to a work injury.
After ceasing work you took out Life Cover Insurance.
You later received a lump sum insurance payout.
You were made redundant and have not been employed or undertaken any work activities for the period of time when you took out the insurance and claimed on the policy.
You had a domestic injury which required surgery and affected your ability to undertake home duties, such as cooking, cleaning and laundry.
You made a claim on your Life Cover Insurance policy and received a payment in recompense for the injury which was sustained.
You were eligible for the Life Cover Insurance payout as you were certified by a medical professional as unfit to undertake home duties.
The payment you received was based on an agreed amount as per the initial insurance policy schedule.
The insurance payment you received was not for income replacement and was not reliant on you working.
The payment was in recompense for being unable to perform home duties such as cooking, cleaning and laundry.
You were not undertaking any paid work activities during the claim period, and have not done so since leaving work.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Section 118-37(1)(b)