Private ruling: Mining Compensation
Published: April 2014
Ruling period: Income year ended 30 June 2012 | Income year ended 30 June 2013 | Income year ended 30 June 2014 | Income year ended 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the payments under the Agreements be assessable as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No | Q2: Will the payment under the Agreements be disregarded as a capital gain under section 118-37 of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: You have entered into a compensation agreement under the Environmental Protection Act 1994 with a company to compensate you for the effects caused by their activities on adjacent land. The company holds the Environment Authority over the property. Your dwelling/residence is deemed to be a sensitive place. The Agreements provides that you have been compensated for the following impacts caused by the operations of the company: • Noise • Dust • Odour • Light • Vibration emissions.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Paragraph 118-37(1)(b)

Reasons for decision: Summary: Taxation Ruling TR 95/35 provides the Commissioner's view on the taxation implications of compensation receipts. Accordingly to determine the tax treatment of a compensation payment a "look through" approach is adopted to identify the relevant asset to which the compensation relates. Having regard to your full circumstances, it is accepted that you have been compensated primarily for surrendering your right to seek compensation for noise, dust, odour, light and vibration emissions caused by the operations of the company. Consequently the compensation payments will not be assessable income under section 6-5 of the ITAA 1997 as the payments do not relate to an underlying asset, but rather relates to a disposal by the taxpayer of the right to seek compensation. In this instance the surrendered right to seek compensation relates to a personal wrong, injury or illness which you have suffered personally and with be therefore be disregarded under paragraph 118-37(1)(b) of the ITAA 1997.