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Edited version of your written advice
Authorisation Number: 1051495185624
Date of advice: 8 April 2019
Ruling
Subject: Compensation Payment
Question
Is the insurance compensation payment received taxable in Australia?
Answer
No
The compensation payment received which is identified and calculated as an amount for the loss of earning capacity is not deemed to be statutory or ordinary income. Subsection 6-15(1) of the ITAA 1997 provides that if an amount is not ordinary or statutory income it is not assessable income. No part of the compensation you received for loss of earning capacity is taxable in Australia.
This ruling applies for the following period:
Period ending 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You are a national of Country W.
You are not a tax resident of Australia.
You were involved in a car accident while on visiting Australia.
You sustained serious injuries in the accident.
The relevant insurer has wholly admitted liability for your claim.
The statutory benefits scheme entitles claimants to weekly benefits based on their pre-injury earnings. The payments are made fortnightly and are terminated at retirement age.
A person is only entitled to receive weekly payments if they reside outside of Australia where the loss of earnings is likely to be permanent. It was determined that your loss of earnings is likely to be of a permanent nature.
A certificate of capacity/certificate of fitness certifies you as having no capacity for any work.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 section 6-15
Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(ii)