Private ruling: Compensation payments
Date of advice: 2 July 2021
Published: September 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 7 March 20XX

Ruling: Q1: Are the compensation payments you receive because you require gratuitous care services included in your assessable income? | A1: No. Compensation payments are ordinary income if they are paid to compensate for loss of income. However, the payments in question are not for loss of your income, rather they are paid to you in settlement of your claim for compensation due to you requiring gratuitous care services. Therefore, these payments are not ordinary income. Also, any capital gain is disregarded under section 118-37 of the Income Tax Assessment Act 1997 because the compensation payments relate wholly to the personal injury you have suffered.

Relevant facts and circumstances: You were involved in a motor vehicle accident. On XX XXXX 20XX a Judge certified in the Supreme Court of XXX you required daily care in accordance with section xxx of the applicable state Motor Accidents Act. You had a meeting with the Insurer, where a settlement was reached regarding the daily care you require. On XX XXXX 20XX a written agreement was provided by the Insurer detailing the payments you are to receive under this settlement, for gratuitous care in relation to the daily care you require.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Section 102-5 | Income Tax Assessment Act 1997 Section 118-37