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Edited version of your written advice
Authorisation Number: 1051447836981
Date of advice: 30 October 2018
Ruling
Subject: Compensation
Question 1
Is the lump sum compensation payment that you received assessable as ordinary income?
Answer
No.
Question 2
Is the lump sum compensation payment that you received assessable under the capital gains tax (CGT) provisions?
Answer
Yes.
Question 3
Is the lump sum compensation payment that you received exempt from taxation due to the application of paragraph 118-37(1)(a) of the Income Tax Assessment Act 1997?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You received a lump sum compensation payment.
The compensation payment was related to a wrong or injury that you suffered.
Relevant legislative provisions
Section 6-5 of the ITAA 1997
Section 6-10 of the ITAA 1997
Section 102-5 of the ITAA 1997
Section 118-37 of the ITAA 1997
Reasons for decision
Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes ordinary and statutory income derived directly and indirectly from all sources during the income year. The compensation payment you received is not ordinary income but is a capital nature and therefore assessable under section 102-5 of the ITAA 1997. However, the payment was received for a wrong or injury that you suffered and will be exempt from taxation due the application of paragraph 118-37(1)(a) of the ITAA 1997.