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Edited version of private advice
Authorisation Number: 1052362915517
Date of advice: 18 February 2025
Ruling
Subject: Compensation
Question 1
Can you disregard the capital gain you made from the compensation for financial loss incurred as a result of financial advice paid direct to you as the superannuation fund member?
Answer 1
Yes.
Based on the information provided to the Commissioner the amount is capital and relates to the super account.
An exemption is provided under section 118-305 of the Income Tax Assessment Act 1997 (ITAA 1997) for any capital gain or loss made from a CGT event happening in relation to a right to an allowance, annuity or capital amount payable out of a superannuation fund or an asset of a superannuation fund.
Question 2
Is compensatory interest paid direct to you as the superannuation fund member assessable income?
Answer
Yes.
Based on the information provided to the Commissioner the amount paid to you as compensatory interest is assessable income.
Interest is assessable under section 6-5 of the ITAA 1997 as ordinary income.
This amount must be declared in your tax return when received by you.
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 a compensation payment in relation to your super account.
The compensation related to financial advice given by a former adviser.
You received the compensation for the determined financial loss with compensatory interest.
The compensation related to your superannuation fund, however, the balance of this superannuation fund was transferred several years ago to a new industry superannuation fund.
As a result the relevant superannuation account had been closed.
The relevant financial institution refused to pay the compensation amounts to your new superannuation fund account and as the super account had already been closed, would only pay this amount direct to the member of the super fund.
The compensation was paid directly to you.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 118-305