Private ruling: Compensation
Date of advice: 30 October 2018
Published: January 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the lump sum compensation payment that you received assessable as ordinary income? | A1: No. | Q2: Is the lump sum compensation payment that you received assessable under the capital gains tax (CGT) provisions? | A2: Yes. | Q3: Is the lump sum compensation payment that you received exempt from taxation due to the application of paragraph 118-37(1)(a) of the Income Tax Assessment Act 1997 ? | A3: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You received a lump sum compensation payment. The compensation payment was related to a wrong or injury that you suffered.

Relevant legislative provisions: Section 6-5 of the ITAA 1997 | Section 6-10 of the ITAA 1997 | Section 102-5 of the ITAA 1997 | Section 118-37 of the ITAA 1997

Reasons for decision: Summary: Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes ordinary and statutory income derived directly and indirectly from all sources during the income year. The compensation payment you received is not ordinary income but is a capital nature and therefore assessable under section 102-5 of the ITAA 1997. However, the payment was received for a wrong or injury that you suffered and will be exempt from taxation due the application of paragraph 118-37(1)(a) of the ITAA 1997.