Private ruling: Compensation
Date of advice: 2 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is a lump sum payment designated a Trauma Recovery Benefit as part of an employer’s insurance policy assessable income? | A1: No We agree your assessment of the payments you received as a Trauma Recovery Benefit and confirm that the payment of benefits you received under the trauma feature of your employers insurance policy are not ordinary income and are not statutory income. The Trauma Recovery Benefit is a benefit that is paid for a defined event in this case a personal injury or illness. It is not paid to replace your income. Therefore it will be considered a capital payment. Section 118-37 of the Income Tax Assessment Act 1997 would then operate to disregard the capital gain or loss made on the payment. This results in the payment being non-assessable.

Relevant facts and circumstances: You were diagnosed with a condition in October 2016. You made a claim with insurance company. You were notified that the claim was approved in a letter in 2017 which stated that you were eligible to receive a Trauma Recovery Benefit payment. The benefit payment has been included in the total of your 2017 Pay As You Go (PAYG) statement supplied by your employer.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 subsection 6-5(2) | Income Tax Assessment Act 1997 section 6-10