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Edited version of private advice
Authorisation Number: 1051681739752
Date of advice: 18 May 2020
Ruling
Subject: Income tax - assessable income - lump sum compensation payment
Question 1
Will the lump sum payments you received pursuant to your states workers compensation legislation, be included in your assessable income?
Answer
No.
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with receipts of ordinary income. It does not operate to include in assessable income amounts of a capital nature. The payment you have received is capital in nature and therefore not assessable income.
Additionally, as the criteria in subsection 82-135(i) of the ITAA 1997 is satisfied the payment is excluded from being an Eligible Termination Payment.
The other applicable sections, section 15-30 of the ITAA 1997 and the capital gains tax provisions of the ITAA 1997, also will not operate to make the payment assessable.
Therefore the compensation lump sum payment you received will not be included in your assessable income.
Question 2
Will the amount paid as a contribution towards a private expense be included in your assessable income?
Answer
No.
This amount is not a compensation payment and has not been paid for loss of earnings nor will it recur in the future.
The payment is a contribution towards a private expense and you are not required to include the amount in your assessable income.
This ruling applies for the following period:
Financial year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You sustained compensable disabilities said to have arisen from your employment.
You have received a dissected lump sum amount paid pursuant to your states workers compensation legislation.
You voluntarily resigned from your employment.
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 104-25
Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(i)