Private ruling: Assessability of your lump sum compensation payment
Date of advice: 30 October 2018
Published: January 2019
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the lump sum payment you received pursuant to section 56 of the Return to Work Act 2014 (South Australia) (RWA) assessable as either ordinary income or as a capital gain? | A1: No. Section 56 of the RWA entitles a worker to compensation for economic loss of future earning capacity. Such amounts do not have the character of ordinary income. They are based on a sum prescribed by statute which bears no relationship to the employee's current or former earnings. In contrast, the calculation of weekly payments according to the worker's past and current earnings indicates that they reflect an actual loss of income as opposed to a loss of income earning capacity. | Q2: Is the lump sum payment you received pursuant to section 58 of the RWA assessable as either ordinary income or as a capital gain? | A2: No. Section 58 of the RWA entitles a worker to compensation for non-economic loss by way of a lump sum. The amount received is calculated as a proportion of the prescribed sum for the degree of WPI caused by the work injury.

Relevant facts and circumstances: You sustained permanent impairment said to have arisen from your employment. You made a claim for compensation pursuant to the RWA sections 56 and 58 of the RWA . In accordance with Part 2 Division 5 section 22 of the RWA you have been assessed as having XX% whole person impairment (WPI).

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 15-30 | Income Tax Assessment Act 1997 section 104-25 | Income Tax Assessment Act 1997 subparagraph 118 37(1)(a)(i)