Private ruling: Lump sum payment - compensation for personal injury
Date of advice: 25 November 2020
Published: January 2021
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 18 November 20XX

Ruling: Q1: Is the amount received as a lump sum compensation for personal injury exempt for income tax purposes? | A1: Yes. The lump sum payment you received in settlement of your claim is not considered ordinary income. Also, it is not statutory income as any capital gain is disregarded under paragraph 118-37 of the Income Tax Assessment Act 1997 (ITAA 1997) which provides an exemption for compensation received for any wrong, injury or illness you or your relative suffers personally. Subsection 6-15(1) of the ITAA 1997 provides that if an amount is not ordinary or statutory income it is not assessable income. Consequently no part of the amount you received is included in your assessable income.

Relevant facts and circumstances: You were involved in a motor vehicle accident. You made a claim for injuries with your insurance provider. You received an amount for compensation for the injury.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 subsection 6-15(1) | Income Tax Assessment Act 1997 section 118-37