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Edited version of private advice
Authorisation Number: 1051737877956
Date of advice: 21 August 2020
Ruling
Subject: Victim of crime lump sum payment
Question 1
Is the lump sum payment you received assessable income as per section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No. Pursuant to the Income Tax Assessment Act 1997, personal injury lump sum compensation payments for victims of crime are not considered to be assessable income. It is accepted that the lump sum payment you have received is not a payment for assessable income as it was not earned, expected, relied upon, and did not have an element of periodicity, recurrence or regularity.
Question 2
Is the lump sum payment you received disregarded from capital gains tax (CGT) under subparagraph 118-37(1)(a)(ii) of the ITAA 1997?
Answer 2
Yes. The Commissioner accepts that the lump sum payment you have received as a victim of crime, is not a capital amount and therefore is disregarded. You do not pay any Capital Gains Tax on a lump sum personal injury compensation payment as a victim of crime. If you earn interest on your personal injury victim of crime settlement money, the interest earned may be taxable and may need to be recorded in your tax return. Similarly, if you use your settlement money to purchase an asset that is subject to Capital Gains Tax, you may be required to pay Capital Gains Tax when you sell that asset.
This ruling applies for the following period:
Year Ended 30 June 2020
The scheme commences on:
1 July 2019
Relevant facts and circumstances
You applied for financial assistance on X X 20XX as a result of a criminal offence committed against your person falling within the definition of offences in section 51 to 62 of the Crimes Act 1900.
Your application related to an injury, which is related to an act of violence.
You received a lump sum payment known as a recognition payment under the Victims of Crime (Financial Assistance) Act 2016 (the Act).
The payment was for $XX,XXX for financial assistance pursuant to section 203(4) of the Act, was made on the XXX 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(ii)