Private ruling: Lump sum payment
Date of advice: 20 January 2023
Published: 6 March 2023
Ruling period: Income year ending 30 June 20XX.
Date scheme commenced: 1 July 20XX.

Ruling: Q1: Will the Payment be included in your assessable income? | A1: No The Payment is viewed as being capital in nature as it does not have the necessary characteristics to be considered ordinary income. Therefore, the Payment is not assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). A capital gains tax (CGT) event C2 will occur upon the receipt of the Payment as your rights under the Policy will end. Any capital gain or loss that you make as a result of CGT event C2 happening is disregarded under section 118-300 of the ITAA 1997 in accordance with the application of the principles contained in Taxation Determination TD 2007/4.

Relevant facts and circumstances: While you were living in Country X you took out an annuity policy (the Policy) which included provisions for a payment to be made in the event of your death. You migrated to Australia from Country X and became a resident of Australia for taxation purposes in the same year. You wish to close the Policy and have completed the requirements in Country X that will enable you to receive a payment in relation to the Policy and will stop you from being a tax resident of, and ends all attachments with Country X. You will receive a payout of a specified amount in relation to the Policy (the Payment) which has been recently processed in Country X. You will receive the Payment during the ruling period.

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 Section 118-300 | Income Tax Assessment Act 1997 Subsection 995-1(1)