Private ruling: Compensation – lump sum
Date of advice: 20 November 2018
Published: February 2019
Ruling period: Year ending 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Will the lump sum compensation payment you received or any portion thereof be assessable as either ordinary income or as a capital gain? | A1: No The lump sum is not assessable as ordinary income as it lacks any element of periodicity, recurrence or regularity, nor is it paid to compensate for loss of income. This amount is considered to be capital in nature. Subparagraph 118-37(1)(a) states that you will be exempt from a capital gain from damages you receive or any wrong or injury you suffer either in your occupation, or personally. Therefore, the lump sum payment you will receive is not assessable as either ordinary or statutory income and you will not be required to include the amount in your assessable income.

Relevant facts and circumstances: As a result of a dispute with your employer during and following your termination, you and your employer agreed to settle all claims and disputes, with your employer paying you a sum of general damages in settlement of your general protections claim.

Relevant legislative provisions: Income Tax Assessment Act section 6-5 | Income Tax Assessment Act section 6-10 | Income Tax Assessment Act section 10-5 | Income Tax Assessment Act section 104-25 | Income Tax Assessment Act paragraph 104-25(1)(b) | Income Tax Assessment Act subsection 104-25(2) | Income Tax Assessment Act paragraph 104-25(2)(a) | Income Tax Assessment Act paragraph 104-25(2)(b) | Income Tax Assessment Act paragraph 108-5(1)(b) | Income Tax Assessment Act sub paragraph 118-37(1)(a)(ii)