Private ruling: Compensation - superannuation advice
Date of advice: 17 April 2026
Published: 13 July 2026
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: XX XXX 20XX

Ruling: Q1: Is the Compensation Amount received by the Taxpayer assessable income of the Taxpayer in accordance with ordinary concepts for the purposes of section 6-5 of the Income Tax Assessment Act 1997 ('ITAA 1997')? | A1: No. | Q2: Is the Compensation Amount received by the Taxpayer a taxable capital gain? | A2: No. | Q3: Is the Compensation Amount received by the Taxpayer assessable income of the Taxpayer under any other provision? | A3: No.

Relevant facts and circumstances: Background The Taxpayer took up membership in a superannuation fund on X XX XXXX. On X XX XXXX, the Taxpayer received advice to roll over their member balance with X to an X account. Shortly after the X Account was opened, the Taxpayer was notified that their adviser had ceased working as an adviser and that X would be their replacement adviser. The Taxpayer was dissatisfied with X's services as an adviser. The Taxpayer was dissatisfied with the growth in the X Account. The Taxpayer ultimately decided to close the X Account and rolled over the balance to a self-managed super fund. Review and compensation On 4 February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry tabled its report in Parliament. Consequently, the Taxpayer was contacted by X's review team by letter and email to advise them that they were reviewing the advice provided by X between X XX XXXX and X XX XXXX. On X XX XXXX, the Taxpayer received a letter from X that advised the following: Our review has determined that you incurred a financial loss due to the financial advice you received ... To place you in the financial position you would have been in had you received appropriate advice, we are offering you the following compensation amount. Total compensation = $X The total compensation amount offered was calculated by reference to a compensation amount referable to the difference between what the member balance would have been as at X XX XXXX, if it had been supported by X investments compared to the actual investments. On X XX XXXX, the Taxpayer notified X by email that they had appointed X to assess and advise them in respect of the quantum of their loss. On X's advice, the Taxpayer maintained that the rollover of the Taxpayer's superannuation on X XX XXXX did not represent all the losses they had incurred. A Deed of Settlement and Release between X and the Taxpayer was signed on X XX XXXX ('the Deed'). Under the Deed, X agreed to pay the Taxpayer an amount of $X which was calculated as the total superannuation loss incurred by the Taxpayer over the period X XX XXXX to X XX XXXX ('the Compensation Amount'). The Compensation Amount does not include an interest component. On or about the date of the Deed, the Compensation Amount was paid to the Taxpayer personally.

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 104-25 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 118-305

Reasons for decision: Summary: The Compensation Amount received by the Taxpayer is not income according to ordinary concepts of the Taxpayer in accordance with section 6-5. | Detailed Reasoning - Income according to ordinary concepts: Subsection 6-5(1) provides that your assessable income includes 'income according to ordinary concepts', which is called ordinary income. 'Income according to ordinary concepts' is not defined in the ITAA 1997 and takes its meaning from case law. Factors commonly identified in case law that are relevant in determining whether a receipt constitutes income according to ordinary concepts include the following: a. whether the receipt is periodical, regular or recurrent; b. whether the receipt is relied upon by the recipient; c. whether the receipt is a result of business activities or services rendered; and d. whether the receipt is a result of a return on an investment. | Detailed Reasoning - Application to your circumstances: The Compensation Amount was a once off receipt calculated by reference to the possible loss incurred in the capital balance of the Taxpayer's superannuation account. The Compensation Amount does not exhibit any of the typical factors outlined above that are commonly associated with income according to ordinary concepts. It is accepted that the Compensation Amount is not income of the Taxpayer according to ordinary concepts for the purposes of section 6-5. | Summary: Any capital gain or capital loss that arises from the Taxpayer signing the Deed can be disregarded under subsection 118-305(1). | Detailed Reasoning - Relevant CGT provisions: Subsection 102-5(1) provides that your assessable income includes your net capital gain (if any) for the income year. Paragraph 108-5(1)(b) provides that a CGT asset includes a legal or equitable right that is not property. Paragraph 104-25(1)(b) provides that CGT event happens if your ownership of an intangible CGT asset ends by the asset being released, discharged or satisfied. Subsection 104-25(3) provides that you make a capital gain from CGT event C2 happening if the capital proceeds from the ending are more than the asset's cost base. However, section 118-305 provides the following: (1) A capital gain or capital loss is disregarded if you make it from a CGT event happening in relation to any of the following: (a) a right to an allowance, annuity or capital amount payable out of a superannuation fund or approved deposit fund; (b) a right to an asset of such a fund; (c) a right to any part of such an allowance, annuity, capital amount or asset. (2) However, this exemption is not available if: (a) you are the trustee of the fund and a CGT event happens in relation to a CGT asset of the fund; or (b) an entity receives a payment or property where: (i) the entity was not a member of the fund; and (ii) the entity acquired the right to the payment or property for consideration. (3) ... | Detailed Reasoning - Application to your circumstances: The Taxpayer's right to seek compensation is a CGT asset for the purposes of paragraph 108-5(1)(b). It is also an intangible CGT asset. The Taxpayer's right to seek compensation was released upon entering into the Deed. Therefore, CGT event C2 happened on X XX XXXX, the date that the Deed was signed. [1] The Taxpayer will therefore make a capital gain if the capital proceeds from the ending are more than the asset's cost base, the capital proceeds being the Compensation Amount. However, subsection 118-305 provides an exemption for capital gains and capital losses made from CGT events happening in relation to rights to an allowance, annuity or capital amount payable out of a superannuation fund. Under the Deed, the Taxpayer released their right to any claim, action, damage, or loss or liability that they may have had in relation to possible loss incurred in the capital balance of their superannuation account. Accordingly, it is accepted that any capital gain or capital loss that arose from the Taxpayer entering into the Deed relates to a right to a capital amount payable out of a superannuation fund. While subsection 118-305(2) provides exceptions to the availability of the exemption contained in subsection 118-305(1), subsection 118-305(2) will not apply to the Taxpayer. Accordingly, the exemption in subsection 118-305(1) will apply such that any capital gain or capital loss arising from CGT event C2 happening when the Taxpayer signed the Deed will be disregarded. Question 3 | Summary: The Compensation Amount received by the Taxpayer will not otherwise be assessable income of the Taxpayer under any other provision. | Detailed Reasoning - Detailed reasoning: Where an amount is not ordinary income for the purposes of section 6-5, section 6-10 provides the following: (1) Your assessable income also includes some amounts that are not ordinary income. (2) Amounts that are not ordinary income, but are included in your assessable income by provisions about assessable income, are called statutory income. ... Section 10-5 provides a summary list of provisions under which statutory income is included in assessable income, as well as other rules about ordinary income. This includes section 102-5 that has been considered under Question 2. The Commissioner does not consider that the Compensation Amount will be ordinary income or statutory income under any other provision listed in section 10-5. The Commissioner agrees with your submission that section 15-30 will not apply to the Compensation Amount because the lost amount would not have been included in your assessable income. As the Compensation Amount is not ordinary income under section 6-5 or statutory income under section 6-10, the Compensation Amount will not be assessable income of the Taxpayer. [1] See paragraph 104-25(2)(a).