Private ruling: Lump sum payment
Date of advice: 23 June 2022
Published: October 2022
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the lump sum payment received as a critical illness benefit assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. Based on the information provided it is viewed that the critical illness benefit payment you received under the policy is not ordinary income. Therefore, it is not assessable income. | Q2: Is the critical illness benefit payment exempt from capital gains tax under section 118-37 of the ITAA 1997? | A2: Yes. Based on the information provided the critical illness benefit payment was received by you as compensation for a medical illness you suffered personally. Therefore, any capital gain or capital loss in relation to the payment amount is disregarded.

Relevant facts and circumstances: You held an income protection policy. You were diagnosed with medical condition. Under your income protection policy, you were entitled to receive a critical illness benefit if you are diagnosed with a critical illness. Your medical condition is listed as a recognised critical illness covered by the critical illness insurance in your insurance policy. You made a claim and subsequently received a lump sum payment as a critical illness benefit.

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 6-15 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 118-37