Private ruling: Trauma benefit payment - not assessable income
Date of advice: 30 July 2019
Published: October 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the amount you received as trauma benefit assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No, having considered your circumstances and the relevant factors, the Trauma Recovery Benefit payment you received is not considered ordinary income under section 6-5 of the ITAA 1997 and therefore is not assessable. The payment was for a defined period following the diagnosis of your condition and it was not received to replace lost earnings.

Relevant facts and circumstances: You were diagnosed with an illness in 20XX. Your employer has a plan held with Insurer A. You made a claim under this plan and you were paid a trauma benefit over several payments in 20XX. Tax was withheld from the payment and Insurer A issued you with a PAYG payment summary. You used your sick leave whilst you were off work receiving treatment. You returned to work before the six month off work required to receive salary continuance benefit expired and your claim was closed. You provided a copy of the payment letter, the payment summary and the product disclosure statement (PDS). The PDS states: 'We will pay you the monthly benefit if a trauma recovery event happens to the insured member...This benefit is payable whether or not the insured member is disabled.'

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