Edited version of private advice

Authorisation Number: 1051752760183

Date of advice: 9 September 2020

Ruling

Subject: Disability benefits

Question 1

Are the lump sum back payments of disability benefits for past gratuitous care paid by the compulsory third party (CTP) insurer, assessable income of either you or your spouse?

Answer

No. The benefit payments you received were not earned by you as they do not directly relate to services performed. Rather the payments relate to personal circumstances that have arisen during your life. Although the payment can be said to be expected, and perhaps relied upon, this expectation arises from the investment in insurance, rather than from a relationship with personal services performed.

CGT event C2 happened when the insurer made the payment to you under the policy. You made a capital gain at that time. However, a capital gain you make from a CGT event relating directly to compensation you receive for any injury you or your relative suffers personally is disregarded.

Question 2

Are the ongoing fortnightly payments of disability benefits for gratuitous care paid by the CTP Insurer, assessable income of either you or your spouse?

Answer

No. The benefit payments you received were not earned by you as they do not directly relate to services performed. Rather the payments relate to personal circumstances that have arisen during your life. Although the payment can be said to be expected, and perhaps relied upon, this expectation arises from the investment in insurance, rather than from a relationship with personal services performed.

CGT event C2 happened when the insurer made the payment to you under the policy. You made a capital gain at that time. However, a capital gain you make from a CGT event relating directly to compensation you receive for any injury you or your relative suffers personally is disregarded.

This ruling applies for the following periods:

Financial year ended 30 June 20XX

Financial year ending 30 June 20XX

Financial year ending 30 June 20XX

Financial year ending 30 June 20XX

Financial year ending 30 June 20XX

Financial year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were injured in a motor vehicle accident a number of years ago, resulting in you becoming incapacitated.

You have been unable to work since the date of the accident your spouse has provided you with attendant care and domestic services gratuitously on an ongoing basis.

You have made claims under your states CTP scheme in relation to your daily care need as a result of the personal injuries you sustained in the motor vehicle accident.

The CTP insurer organised for an assessment to be undertaken to determine your current and ongoing attendant care requirements for direct personal support for activities of daily living.

Your claims were accepted, and you have received lump sum back payments of disability benefits for past gratuitous care and an ongoing benefit on a fortnightly basis.

Your support needs will be reassessed on an annual basis and the CTP insurer will continue to pay you the ongoing disability benefit for as long as is needed as prescribed by the Act and Regulations.

There is no formal or informal agreement between you and your spouse in relation to the provision of your daily care or renumeration for your care.

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 paragraph108-5(1)(b)

Income Tax Assessment Act 1997 section 118-37

Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(ii)