Private ruling: Lump sum compensation payment
Date of advice: 14 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the lump sum you have been offered or any portion thereof be included in your assessable income? | A1: No.

Relevant facts and circumstances: You are a specified dependent of a worker who died as a result of a compensable disability. You are entitled to receive a lump sum payment.

Relevant legislative provisions: Income Tax Assessment Act section 6-5 | Income Tax Assessment Act 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 has no characteristic of ordinary income as it lacks any element of periodicity, recurrence or regularity and is not a payment in relation to the loss of your income. It is a one-off payment capital payment and therefore not assessable as ordinary income. The receipt of the lump sum amount will give rise to a capital gain (statutory income). However, a capital gain or loss is disregarded under section 118 37(1) of the ITAA 1997, if the CGT event is in relation to compensation or damages received for any wrong, injury or illness suffered by a person or a relative of that person. In your case, the compensation received is for a 'wrong, injury or illness’ you have suffered, being the death of a worker on whom you were dependent. As the lump sum payment is not assessable as either ordinary or statutory income, you would not be required to include the amount in your assessable income.