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Edited version of private advice
Authorisation Number: 1051611064280
Date of advice: 20 November 2019
Ruling
Subject: Lump sum compensation
Is the lump sum payment you received pursuant to section 56 of the Return to Work Act 2014 (South Australia) (RWA) assessable?
Answer
No. It is accepted that the lump sum payment you have received is a capital amount that is disregarded under subparagraph 118-37(1)(a)(i) of the Income Tax Assessment Act 1997 (ITAA 1997).
Question
Is the lump sum payment you received pursuant to section 58 of the RWAassessable?
Answer
No. It is accepted that the lump sum payment you have received is a capital amount that is disregarded under subparagraph 118-37(1)(a)(i) of the ITAA 1997.
This ruling applies for the following period:
Year ended 30 June 2020
The scheme commences on:
1 July 2019
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 sustained permanent impairment said to have arisen from your employment.
You made a claim for compensation pursuant to the RWA.
In accordance with Part 2 Division 5 section 22 of the RWA you have been assessed as having a percentage of whole person impairment (WPI).
Section 56 of the RWA entitles a worker to compensation for economic loss of future earning capacity. Such amounts do not have the character of ordinary income. They are based on a sum prescribed by statute which bears no relationship to the employee's current or former earnings. In contrast, the calculation of weekly payments according to the worker's past and current earnings indicates that they reflect an actual loss of income as opposed to a loss of income earning capacity.
Section 58 of the RWA entitles a worker to compensation for non-economic loss by way of a lump sum. The amount received is calculated as a proportion of the prescribed sum for the degree of WPI caused by the work injury.
Non-economic loss is defined in the RWA as:
· pain and suffering
· loss of amenities of life
· loss of expectation of life
· disfigurement
· any other loss or detriment of non-economic nature.
Your lump sum payments are as follows:
· $XXXX pursuant to section 56 of the RWA.
· $XXXX pursuant to section 58 of the RWA.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 subsection 6-5(1)
Income Tax Assessment Act 1997 section 102-5
Income Tax Assessment Act 1997 paragraph 108-5(1)(b)
Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(i)