Private ruling: Compensation payments
Published: November 2013
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2012

Ruling: Question and answer: | Are the monthly compensation payments received by you assessable income? | Yes.

Relevant facts and circumstances: You receive periodical payments from a disability policy. The disability policy provides for indemnity for work incapacity due to illness. You suffered illness during your work situation. The insurance company determined your disability rate to be more than 33% and commenced periodical payments to you. You use the payments to pay bills associated with your condition.

Relevant legislative provisions: Income tax Assessment Act 1997 Section 6-5(2)

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Based on case law, it can be said that ordinary income generally includes receipts that: · are earned · are expected · are relied upon, and · have an element of periodicity, recurrence or regularity. In your case the monthly payments you are receiving have the characteristics of ordinary income as the payments are expected by you (you have been notified of continuing payments), the payments are relied on by you (you use the payments to pay bills associated with your condition) and they have an element of periodicity, recurrence or regularity (the payment is paid to you periodically). The payments are therefore ordinary income, are assessable and should be declared in your tax return.