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Edited version of private advice
Authorisation Number: 1052354097471
Date of advice: 24 January 2025
Ruling
Subject: Lump sum in arrears offset
Question
Is the lump sum income protection payment eligible for the lump sum in arrears tax offset?
Answer
Yes.
Based on the information provided to the Commissioner the lump sum income protection payment is eligible for the lump sum in arrears tax offset in the relevant income year.
As the lump sum payment is greater than 10% of your taxable income, you are eligible for the lump sum in arrears tax offset. Your lump sum payment was for the back payment of income protection payments paid through your superannuation fund which accrued in earlier income years.
The Australian Tax Office will calculate your lump sum in arrears entitlement when you lodge your tax return; this will also be applicable if you received any extra payments in coming income years. You will need to include the lump sum arrears payment at Question 24 Other Income on your return and include the amount of tax withheld from this income.
For us to calculate your lump sum in arrears tax offset, you will need to provide the amount of your taxable income for each of the income years that the payment related to other than the relevant income year. Also, you will need to include a statement in your tax return that shows the portion of the lump sum arrears payment that relates to each income year involved and copies of the letters from the insurer.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You received an income protection lump sum 'E' payment in the relevant income year.
You received a lump sum payment under a group insurance policy held by Company A, insured by Company B under your superannuation fund.
The lump sum was over multiple income years:
The lump sum payment received by you in the relevant income year was greater than 10% of your taxable income.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 159ZRA