Private ruling: Assessability of lump sum compensation payment
Date of advice: 9 September 2016
Published: October 2016
Ruling period: Year ended 30 June 2017.
Date scheme commenced: 1 July 2016.

Ruling: Q1: Will the amount or any portion thereof to be paid pursuant to section 33 and paragraph 54(1)(a) of the Return to Work Act 2014 (SA) for medical expenses, be included in your assessable income? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 15-30 | Income Tax Assessment Act 1997 Section 118-37

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with receipts of ordinary income. It does not operate to include in assessable income amounts of a capital nature. The money to be received will be capital in nature and therefore not assessable income. Additionally, as the criteria in subsection 82-135(i) of the ITAA 1997 is satisfied the payment is excluded from being an Eligible Termination Payment. The other applicable sections, section 15-30 of the ITAA 1997 and the capital gains tax provisions of the ITAA 1997, also will not operate to make the payment assessable. Therefore the payment you receive will not be included in your assessable income.

Relevant facts: You sustained compensable disabilities said to have arisen from your employment. | You will receive a redemption offer pursuant to section 33 and paragraph 54(1)(a) of the Return to Work Act 2014 (SA). | As part of the agreement you have to resign.