Private ruling: assessability of insurance payout.
Published: August 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the payout that you received from your trauma cover insurance policy taxable? | A1: No.

Relevant facts and circumstances: You received a payout from your insurance provider. You received this payment as part of trauma insurance cover as you have a condition covered by this cover. This amount is not part of a superannuation plan, nor is it to replace income as you hold separate income protection insurance.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-37

Reasons for decision: Summary: Section 118-37 of the Income tax Assessment Act 1997 (ITAA 1997) disregards a capital gain or capital loss made by an individual relating to compensation or damages received by that individual as a result of any wrong, injury or illness they or their relative suffered personally. A receipt of an amount under an insurance policy for a non-death benefit such as total and permanent disablement or trauma constitutes a form of compensation or damages covered by subparagraph 118-37(1)(a)(ii) where the amount is received for a wrong, injury or illness suffered personally by the recipient or the recipient's relative. You received a payment from a trauma cover policy. You are suffering an illness which is a medical condition covered under that trauma cover policy. Therefore the total amount received from that policy payout is disregarded for tax purposes under section 118-37 of the ITAA 1997.