Private ruling: Assessability of compensation income
Published: October 2011
Date scheme commenced: 1 July 2010

Ruling: Questions and answers: | Is your compensation payment assessable income? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You receive regular compensation payments.


Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes the ordinary income derived by the taxpayer directly or 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, and · have an element or periodicity, recurrence or regularity. It is not necessary for all of these characteristics to exist for a particular receipt to be considered ordinary income. Payments to replace income are also considered to be income ( Kiely v. Federal Commissioner of Taxation (1983) 14 ATR 156; 83 ATC 4248). Taxation Determination TD 93/3 provides that periodical compensation payments are considered to be ordinary income because they are paid as compensation for loss of income and/or because they are received regularly and are intended to provide an income supplement. You receive periodic compensation payments. The payments are expected and relied upon. The compensation payments are therefore assessable as ordinary income under subsection 6-5(2) of the ITAA 1997.

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. | This ruling applies for the following period: Year ended 30 June 2011 The scheme commenced on: | Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(2) Reasons for decision