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Edited version of private advice
Authorisation Number: 1051898008575
Date of advice: 9 September 2021
Ruling
Subject: Compensation
Question 1
Does the amount identified as interest form part of your assessable income?
Answer
Yes. Any amount that is in the nature of interest received in addition to the base compensation amount, is ordinary income and will need to be included in your return in the year it is received.
Question 2
Is the remainder of the compensation payment subject to the capital gains tax provisions?
Answer
Yes. The amount received as compensation is not regarded as ordinary assessable income. This amount is capital in nature and subject to the capital gains tax provisions.
Question 3
Will you need to include the remainder of the compensation payment in your income tax return?
Answer
No. In your case any capital gain made will be disregarded under section 118-305 of the Income Tax Assessment Act 1997.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
X August 20XX
Relevant facts and circumstances
You received a letter from a financial institution advising you the advice received in relation to implementation of an investment strategy in your superannuation product was potentially inappropriate and offered a compensation payment.
In the 20XX income year you accepted the offer of a compensation payment which included an amount of interest.
Relevant legislative provisions
Income Tax Assessment Act 1997 - section 6-5
Income Tax Assessment Act 1997 - section 102-5
Income Tax Assessment Act 1997 - section 118-305