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Edited version of private advice
Authorisation Number: 1051889432641
Date of advice: 26 August 2021
Ruling
Subject: Lump sum payment - assessable income
Question
Is the lump sum/bonus payment received on surrender of your life assurance policy included in your assessable income?
Answer
No. A lump sum/Bonus payment received by a resident beneficiary upon surrender of a life bond is not assessable income. In this case Section 26AH(7)(c) of the Income Tax Assessment Act 1936 provides an exception where the policy was affected, purchased or taken on assignment with a view to it being forfeited, surrendered or otherwise terminated, or to it maturing, within 10 years.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You invested in a Life Bond commencing on ## October 20##.
You were diagnosed with an illness in August 20##.
Your ability to care for yourself decreased and in June 20## you became a resident of an Age Care Facility.
The aged care facility calculated the Refundable Accommodation Deposit (RAD).
You only had access to an amount, which was paid to the age care facility in a series of payments,
The bond was surrendered on ## February 20## to cover expenses.
The bond was held for less than 10 years.
Following the closure of the Life Bond, funds were transferred to you.
On ## February 20## a payment was made to the age care facility to cover the RAD balance.
The remaining funds have been left in account and will be used for ongoing care requirements.
Relevant legislative provisions
Section 26AH(7)(a)(ii) of the Income Tax Assessment Act 1936
Section 6-5 of the Income Tax Assessment Act 1997