Private ruling: Lump sum compensation payment – workplace injury
Date of advice: 23 April 2018
Published: July 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Is the lump sum compensation payment that you received for pain and suffering damages arising from injuries sustained at work included in your assessable income? | A1: No. The lump sum payment you received is not ordinary income. While CGT event C2 happened when you entered into the Deed of Release the capital gain you made at that time is disregarded, in accordance with the ATO view contained in Taxation Ruling TR 95/35 Income tax: capital gains: treatment of compensation receipts.

Relevant facts and circumstances: You suffered a workplace injury. You commenced legal proceedings for the recovery of pain and suffering damages in relation to the injury. You were offered a settlement sum to resolve the matter. You accepted the settlement offer and entered into a Deed of Release.

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 10-5 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 subsection 102-5(1) | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 104-25(1) | Income Tax Assessment Act 1997 subsection 104-25(2) | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 paragraph 118-37(1)(a)