Private ruling: Compensation
Date of advice: 21 January 2020
Published: March 2020
Ruling period: Year ending 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Is the lump sum payment you received or any portion thereof assessable as either ordinary income or as a capital gain? | A1: No. Having considered your circumstances, it is accepted that the lump sum payment you received or any portion thereof is not assessable as either ordinary income or as a capital gain.

Relevant facts and circumstances: You sustained an injury as a result of a work place incident. You made a claim for compensation. You have been assessed as having X% whole person impairment (WPI). As the injury resulted in you having a degree of permanent physical impairment, you've received a dissected lump sum payment that was based on a sum prescribed by statute. The first component was paid for 'loss of future earning capacity'. The calculation took into account the prescribed sum that applied to your degree of WPI, your age and the proportion of full-time work performed at the time of the injury. The second component was paid for 'non-economic loss' and calculated as a proportion of the prescribed sum for the degree of WPI caused by the work injury. You accepted the offer.

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 104-25 | Income Tax Assessment Act 1997 subparagraph 118-37(1)(a)(i)