Private ruling: Income derived
Published: December 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Can you declare income protection payments received in the 2011-12 financial year in your 2010-11 assessment? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a person, who is an Australian resident, shall include the ordinary income derived by the person from all sources during the income year. Payments for income protection insurance are considered to be ordinary income for the purpose of section 6-5 of the ITAA 1997. Subsections 6-5(2) and (3) provide that ordinary income is included in the assessable income of a taxpayer when it is derived. In determining the basis of derivation of income, paragraph 42 of Taxation Ruling TR 98/1 states that income from employment would normally be assessable on a receipts basis. Salary, wages or other employment remuneration are assessable on receipt even though they relate to a past or future income period. While we accept that the payments you received relate to the 2010-11 financial year, they were derived in the 2011-12 financial year. Therefore, they must be declared in the 2011-12 financial year.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You were unable to work for the period August 2010 to June 2011 and made a claim on your income protection insurance policy. | You received payments under the policy in July 2011 and August 2011.