Private ruling: Lump sum insurance payment
Date of advice: 12 October 2018
Published: December 2018
Ruling period: 1 July 2018 to 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Is the amount you received as lump sum insurance benefit exempt under section 118-37 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes The payment you received from the insurer is not being made to compensate you for the loss of earnings. Rather it is a one-off, lump sum amount to compensate you for the illness you suffer. Thus, this payment does not meet the ordinary income requirements under section 6-5 of the ITAA 1997 and is not an assessable income. It is also exempt from capital gain under subparagraph 118-37(1)(a)(ii) of the ITAA 1997.

Relevant facts and circumstances: You had a Total and Permanent disability cover (TPD) through your Super with Company A. You have been working as a full time casual employee. As a result of your personal injury, you ceased your casual employment. You submitted a claim for TPD through your Super. The definition applicable to you was Activities of Daily Living due to the fact that you were a casual employee. You provided a copy of the Deed of Release confirming the TPD definition applicable is Activities of Daily Living and you received a lump sum payment.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6- 5 | Income Tax Assessment Act 1997 section 118-37