Private ruling: Lump sum payment assessable under the capital gains tax (CGT) provisions
Published: July 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is any part of your lump sum payment assessable as ordinary income? | A1: No. | Q2: Is any part of your lump sum payment assessable under the capital gains tax (CGT) provisions? | A2: No.


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: Section 6-5 and section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes ordinary and statutory income derived directly and indirectly from all sources during the income year. Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that: · are earned · are expected · are relied upon · have an element of periodicity, recurrence or regularity. The lump sum payment you accepted is not income from rendering personal services, income from property or income from carrying on a business. The payment is also not earned, expected, relied upon and is a one off payment and thus it does not have an element of recurrence or regularity. The lump sum payment is not considered to be ordinary income. | Detailed Reasoning - Capital gains tax: Receipt of a lump sum payment may give rise to a capital gain (statutory income). However paragraph 118-37(1)(b) of the ITAA 1997 disregards payment or receipts for capital gains purposes where the amount relates to compensation or damages a person receives for any personal wrong, injury or illness. The lump sum you received is considered to be exempt from CGT under paragraph 118-37(1)(b). | Detailed Reasoning - Conclusion: As the amount is not ordinary or statutory income it is not assessable income. Therefore no part of the settlement amount is required to be included in your income tax return.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You lodged a complaint with the Equal Opportunity Commission (EOC) against another party for spouse or partner's identity discrimination. Your complaint was accepted. | Following a conciliation meeting, it was agreed that the matter would be settled without proceeding to a tribunal hearing. | You signed a Deed of Settlement and Release (the deed) where it was agreed that you would receive a lump sum amount, subject to you filling a notice of discontinuance with the EOC. | You have received the agreed amount as set out in the deed.