Private ruling: Compensation payment - interest - assessable
Published: September 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2010

Ruling: Q1: Is the interest derived on the investment of your future medical component of your compensation payments exempt from income tax? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5

Reasons for decision: Summary: The assessable income of a taxpayer includes income according to ordinary concepts. Characteristics of income that have evolved from case law include receipts that: · are earned, · are expected, · are relied upon, · have an element of periodicity, recurrence or regularity. Interest income is an example of ordinary income as it is expected, relied on and has an element of periodicity, recurrence or regularity. In your case, you received a lump sum payment to compensate you for your injury and any interest income that you derive as a result of investing the amount will be deemed to be ordinary income and assessable in the year in which it is derived. We acknowledge your particular personal circumstances; however the Commissioner of Taxation has no discretion or power to exempt individual taxpayers from paying tax where the law says it must be paid.

Relevant facts: You sustained a personal injury as a result a car accident. | You commenced legal proceedings and subsequently settled your claim. | You received compensation as a result of finalising your claim. | The amount of the compensation received was for various components, including future medical expenses. | You have invested the compensation payment and receive interest | You require surgery and intend to use some of the compensation payment to pay for the procedure.