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Edited version of your written advice
Authorisation Number: 1051439849049
Date of advice: 12 October 2018
Ruling
Subject: Lump sum insurance payment
Question
Is the amount you received as lump sum insurance benefit exempt under section 118-37 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
The payment you received from the insurer is not being made to compensate you for the loss of earnings. Rather it is a one-off, lump sum amount to compensate you for the illness you suffer. Thus, this payment does not meet the ordinary income requirements under section 6-5 of the ITAA 1997 and is not an assessable income. It is also exempt from capital gain under subparagraph 118-37(1)(a)(ii) of the ITAA 1997.
This ruling applies for the following period:
1 July 2018 to 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You had a Total and Permanent disability cover (TPD) through your Super with Company A.
You have been working as a full time casual employee.
As a result of your personal injury, you ceased your casual employment.
You submitted a claim for TPD through your Super. The definition applicable to you was Activities of Daily Living due to the fact that you were a casual employee.
You provided a copy of the Deed of Release confirming the TPD definition applicable is Activities of Daily Living and you received a lump sum payment.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6- 5
Income Tax Assessment Act 1997 section 118-37