Private ruling: Assessable income
Date of advice: 22 April 2026
Published: 13 July 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Is the lump sum compensation payment assessable income in Australia? | A1: No. Based on the information provided to the Commissioner the lump sum payment you from Country Z is not assessable under Section 6-5 of the Income Tax Assessment Act 1997 . Case law indicates that receipts are generally characterised as ordinary income where they have characteristics such as: • Being earned from personal services, property, or business activities • Being periodic, regular, or recurrent • Being expected and relied upon, and • Having a connection with income-producing activities The lump sum payment received by you does not have the characteristics of ordinary income because: • The payment is not remuneration for services rendered by you • It is not income from property or business activities • It is not periodic or recurrent, being a one-off compensation payment, and • The payment arises from compensation for illness and personal suffering caused by infected blood products Although the payment may have been anticipated once eligibility was established, the expectation arises from a compensation scheme addressing personal injury, rather than from an income-producing activity. The lump sum amount does not have the characteristics of ordinary income and is therefore not assessable income. | Q2: Will any capital gain arising on the lump sum payment be disregarded under Section 118-137 of the Income Tax Assessment Act 1997 ? Yes. Based on the information provided to the Commissioner any capital gain will be disregarded under Section 118-137(1)(B) of the Income Tax Assessment Act 1997 . Subsection 6-10(4) of the ITAA 1997 provides that your assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The provisions dealing with statutory income are listed in section 10-5 of the ITAA 1997. Included in this list is capital gains (section 102-5 of the ITAA 1997). Amounts received in respect of personal injury which are not for reimbursement of medical expenses, or direct compensation for loss of income, are usually capital in nature. When compensation is received, a Capital Gains Tax (CGT) event (usually CGT event C2) may occur when the taxpayer's right to seek compensation is satisfied or discharged. This could potentially give rise to a capital gain. However, paragraph 118-37(1)(b) of the ITAA 1997 provides that a capital gain or capital loss is disregarded if the compensation relates to: • Compensation or damages received for any wrong, injury, or illness you or your relative suffers personally The payment was made to you as compensation for personal injury. The various components of the payment are determined under a tariff-based compensation scheme for personal injury rather than reflecting actual lost income or earnings. As the payment relates to compensation for personal injury suffered by you, any capital gain arising from the satisfaction of the right to compensation is disregarded under paragraph 118-37(1)(b) of the ITAA 1997.

Relevant facts and circumstances: You are an Australian tax resident. You have received a lump sum compensation payment from Country Z. The payment was received by you a number of months ago. The compensation scheme was set up as an independent body to administer compensation for people who were injured under specific conditions. You were eligible for compensation under the terms of the compensation scheme. You applied for compensation and was awarded an amount. Previously, you have received payments from a similar compensation scheme, and these payments are treated as non-assessable, non-exempt income. The Country Z tax position is that the amounts are not assessable.

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 section 118-137