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Edited version of private advice
Authorisation Number: 1051758295683
Date of advice: 28 September 2020
Ruling
Subject: Personal injury compensation
Question
Is the capital gain you made on receipt of the lump sum payment disregarded?
Answer
Yes. Capital gains tax (CGT) event C2 happened when you signed the Agreement. However, the capital gain you made from the CGT event is disregarded, as the payment you received relates wholly to the personal wrong or injury you have suffered. As such, no part of the lump sum payment is included in your assessable income.
This ruling applies for the following period
Financial year ended 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
You had an offence committed against you when you were a child.
You were paid a lump sum payment in 20XX under the State's prior compensation scheme, which provided for compensation for injuries arising from personal offences.
In the 20XX you engaged the services of a legal firm to represent you in a personal injury claim against the State.
Your legal representative gave written notice of the claim, in the approved form to the State, care of the Crown Solicitor.
Prior to starting court proceedings, a compulsory conference was held where all parties agreed to settle on a without admissions basis.
The State agreed to pay you the negotiated sum in full and final settlement of all claims that you have had, or may have in the future, in respect of the facts and circumstances subject of the claim.
You have provided a signed copy of the Release, Discharge and Indemnity Agreement.
As part of the Agreement, you authorised a payment to be made for the refund of the amount you had previously received under the State's prior compensation scheme.
The settlement funds were paid into your lawyer's law practice trust account in the 20XX financial year and you have received the net settlement monies after the deduction of the refund, disbursements and professional fees.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-25
Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(ii)