Edited version of private advice

Authorisation Number: 1052013551556

Date of advice: 27 July 2022

Ruling

Subject: Assessable income - lump sum payment

Question

Are wages you received in arears in two lump sum payments included in your assessable income in the 20XX income year?

Answer

Yes.Taxation Determination TD 93/58 outlines the circumstances under which the receipt of a lump sum compensation/settlement payment is included in assessable income as ordinary income. The TD states that where the payment is for the loss of income, the amount is assessable as ordinary income. The point at which ordinary income is assessable under section 6-5 of the Income Tax Assessment Act 1997 is when you have received it. That is when it is applied to you or when it is dealt with as you direct.

The lump sum payments you received consisted of wages owed to you by the employer. Therefore, they are ordinary income. You received the payments when they were made to your bank account and are assessable in the 20XX income year.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Wage payments you were due had been the subject of an ongoing dispute with the employer.

You executed a deed of settlement with the employer

The release was executed by you in late 20XX and later 20XX by the employer.

A lump sum payment was made in your bank account in late 20XX.

Another lump sum payment was made in your bank account in late 20XX.

The employer has incorrectly backdated the payment to mid 20XX on your income statement.

You have engaged the employer to change the income statement and record the payments in the correct period. However, they have not agreed to do this.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5