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Edited version of private advice
Authorisation Number: 1051563963954
Date of advice: 9 August 2019
Ruling
Subject: Compensation payment - motor vehicle accident
Question
Is the compensation payment for a motor vehicle accident taxable?
Answer
No.
The lump sum payments you received in settlement of your claims are not considered ordinary income. Also, they are not statutory income as any capital gain is disregarded under paragraph 118-37 of the Income Tax Assessment Act 1997 (ITAA 1997) which provides an exemption for compensation received for any wrong, injury or illness you or your relative suffers personally. Subsection 6-15(1) of the ITAA 1997 provides that if an amount is not ordinary or statutory income it is not assessable income. Consequently no part of the amount you received is included in your assessable income.
This ruling applies for the following periods:
Year ending 30 June 2018
Year ending 30 June 2019
Relevant facts and circumstances
You were in a motor vehicle accident.
You made an intention to make a claim for injuries to your state insurance division.
You received an amount for compensation for the motor vehicle accident.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 subsection 6-15(1)
Income Tax Assessment Act 1997 section 118-37