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Edited version of private advice
Authorisation Number: 1051580165450
Date of advice: 16 September 2019
Ruling
Subject: Lump sum compensation payment made pursuant to the Return to Work Act 2014 (South Australia) (RWA)
Question
Should the amount of $X or any portion thereof to be paid pursuant to section 33 and paragraph 54(1)(a) of the RWA be included in your assessable income?
Answer
No.
The lump sum payment has been received as compensation for a 'wrong or injury you have suffered in your occupation'. It bares none of the characteristics of ordinary income as it lacks any element of periodicity, recurrence or regularity, and nor is it paid to compensate for loss of income. Additionally, it does not satisfy all of the conditions set out in section 82-130 of the Income Tax Assessment Act 1997 (ITAA 1997) to be an Employment Termination Payment.
Therefore, the lump sum is capital in nature and will not be assessable as the capital gain is disregarded under subparagraph 118-37(1)(a)(i) of the ITAA 1997 as the CGT event is in relation to compensation or damages received for any wrong or injury you suffered in your occupation.
This ruling applies for the following period:
Year ended 30 June 20xx
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
During your employment you sustained a workplace injury.
You have accepted a redemption offer pursuant to section 33 and paragraph 54(1)(a) of the RWA to the value of $X.
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 15-30,
Income Tax Assessment Act 1997 Section 104-25, and
Income Tax Assessment Act 1997 Subparagraph 118-37(1)(a)(i).