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Edited version of private advice
Authorisation Number: 1051991916770
Date of advice: 9 June 2022
Ruling
Subject: Compensation payment
Question
Is the lump sum compensation payment received by you for personal injury included in your assessable income?
Answer
No.
Based on the information provided to the Commissioner, CGT event C2 about cancellations, surrender and similar endings occurred when you received the payment. The whole undissected lump sum amount is treated as being consideration received for the disposal of the right to seek compensation. As your claim against the plan was for personal injury, under paragraph 118-37(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) the capital gain arising from CGT event C2 can be disregarded.
Furthermore, the payment you received does not have the hallmarks of ordinary income and is not included in your assessable income.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a salaried employee.
You received a specific injury benefit through a group salary continuance plan.
You are not required to pay a premium or fee to be a member of this plan.
Per the plan rules, you received a lump sum benefit as you suffered a fracture to your leg.
The injury was not work related.
You did not take any time off work apart from 5 days sick leave.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 104-25
Income Tax Assessment Act 1997 section 118-37(1)