Private ruling: Compensation – lump sum payment – workplace injury – permanent impairment
Date of advice: 10 May 2018
Published: August 2018
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the lump sum payment you received from your state workers compensation authority for a permanent impairment included in your assessable income? | A1: No. The lump sum payment you received is not ordinary income. In addition, while CGT event C2 happened when you accepted the offer, the capital gain you made at that time is disregarded in accordance with the ATO view contained in Taxation Ruling TR 95/35 Income tax: capital gains: treatment of compensation receipts.

Relevant facts and circumstances: You sustained a workplace injury resulting in a degree of permanent impairment (DPI). You accepted a lump sum payment from your state’s workplace insurer, under the relevant worker’s compensation act. The DPI for your physical injury was calculated as 5%. The Notice of Assessment states that if your DPI is less than 20% you have two options: either to accept the lump sum offer, or to pursue damages against your employer. You accepted a lump sum offer of $xxx on XX/XX/201X. The payment was made to you by WorkCover State A under section 187 of the Workers’ Compensation and Rehabilitation Act 2003 .

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 10-5 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 subsection 102-5(1) | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 104-25(1) | Income Tax Assessment Act 1997 subsection 104-25(2) | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 paragraph 118-37(1)(a)