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Edited version of private advice
Authorisation Number: 1051986720428
Date of advice: 25 May 2022
Ruling
Subject: Lump sum compensation - workers compensation
Question 1
Will the compensation amount or any portion thereof paid by Return to Work SA pursuant to sections 33 and 54 of the Return to Work Act 2014 (South Australia), that is, the medical redemption, be included in your assessable income?
Answer
No.
Question 2
Will the compensation amount be subject to income tax or capital gains tax in any other way?
Answer
No.
It is accepted by the Commissioner, that the compensation payment you received in relation to sections 33 and 54 of the Return to Work Act 2014 (South Australia), is not assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and is not assessable as statutory income under section 6-10 of the ITAA 1997.
The compensation payment relates to personal injury, and any capital gain can be disregarded under paragraph 118-37(1)(a) of the ITAA 1997 as a capital gain or capital loss you make from a capital gains tax event relating directly to any of these is disregarded:
a. Compensation or damages you receive for:
i. any wrong or injury you suffer in your occupation, or
ii. any wrong, injury or illness you or your relative suffers personally
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You commenced employment with A on or around DD/MM/YYYY.
You suffered a work-related injury on or around DD/MM/YYYY.
You signed an agreement on DD/MM/YYYY between yourself and A.
Within the agreement it was stated that A's undischarged liability to pay compensation for medical and other expenses of the kind referred to in section 33 of the Return to Work Act 2014 (South Australia) incurred by you after DD/MM/YYYY be redeemed by a capital payment.
You resigned effective DD/MM/YYYY.
You received the payment within the 20XX-XX financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 paragraph 118-37(1)(a)