Private ruling: Assessability of workers compensation
Published: May 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Questions and Answers: | Will the compensation amount or any portion thereof to be paid by your employer pursuant to sections 67 and 76 of the Workers Compensation and Rehabilitation Act 1981 (WA) (WCRA) be included in your assessable income? | No. | Will any capital gain arising from the compensation amount be disregarded? | Yes.




Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You sustained compensable disabilities said to have arisen from your employment. | You have indicated a willingness to accept a lump sum payment for the purposes of section 67 of the WCRA as redemption of your employer's liability to you in respect of your incapacity under the WCRA. | Upon the agreement being recorded under section 76 of the WCRA the following will apply: | (i) You will have no further entitlement to any other claim to redemption of weekly payments arising out of that injury. | (ii) You will have no further entitlement in respect of that injury subsequent to the date of this election, to payment of expenses under the Workers Compensation and Injury Management Act 1981 Schedule 1 clauses 9,17,18,18A & 19 of schedule 1 (that is, in general terms, medical or surgical, dental physiotherapy or chiropractic advice or treatment, first aid and ambulance expenses, medical requisites, charges for attendance and treatment by way of injury management, charges for hospital treatment and maintenance, cost of artificial aids and travelling expenses). | (iii) You shall have no entitlement to further monies upon any increase to the prescribed amount for this degree of permanent impairment the subject of this election. | The payout comprises a lump sum amount. | Relevant provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 15-30. | Income Tax Assessment Act 1997 Section 118-37. | Explanation: (This does not form part of the notice of private ruling): Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) | Section 6-5 of the ITAA 1997 deals with receipts of ordinary income. It does not operate to include in a taxpayer's assessable income amounts of a capital nature. | The compensation amount is to be paid under sections 67 and 76 of the WCRA. The money to be received will be in satisfaction of giving up your rights to weekly payments of compensation by way of redemption of liability to make future weekly payments as for permanent partial incapacity and medical and other expenses. | These are rights of a capital nature and the money to be received to compensate you for their relinquishment will similarly be of a capital nature. | Section 6-5 of the ITAA 1997 will not apply to the compensation amount. | Section 15-30 of the ITAA 1997 | Section 15-30 of the ITAA 1997 operates to include in a taxpayer's assessable income: | any amount received by way of insurance or indemnity for the loss of an amount if: | (a) the loss amount would have been included in your assessable income; and (b) the amount you receive is not assessable as ordinary income under section 6-5. | The compensation amount to be paid under sections 67 and 76 of the WRCA does not meet this description as it is not paid for loss of earnings but in satisfaction of the giving up of capital rights. | Section 15-30 of the ITAA 1997 will not apply to the compensation amount. | Section 118-37 of the ITAA 1997 | Section 118-37 of the ITAA 1997 states that you may disregard any capital gain or capital loss from any Capital Gain Tax event 'relating directly .... to compensation or damages you receive for any wrong or injury you suffer in your occupation.' | The compensation amount to be paid under sections 67 and 76 of the WRCA meets this description. | Section 118-37 of the ITAA 1997 will apply to the compensation amount so that any capital gain or capital loss you make will be disregarded.