Class Ruling CR 2012/40
Date of effect: 1 July 2011

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provisions identified below apply to the defined class of entities who take part in the scheme to which this Ruling relates. Relevant provisions 2. The relevant provisions dealt with in this Ruling are: All subsequent references in this Ruling are to the ITAA 1997. Class of entities 3. The class of entities to which this Ruling applies comprises individuals who receive a payment from the Western Australian Government under the Stolen Wages Reparation Scheme WA being administered from 7 March 2012 to 6 September 2012. Qualifications 4. The Commissioner makes this Ruling on the precise scheme identified in this Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 18 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to:

Class of entities or scheme: 3. The class of entities to which this Ruling applies comprises individuals who receive a payment from the Western Australian Government under the Stolen Wages Reparation Scheme WA being administered from 7 March 2012 to 6 September 2012. | Qualifications: 4. The Commissioner makes this Ruling on the precise scheme identified in this Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 18 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968 , no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 8. This Ruling applies from 1 July 2011 to 30 June 2013. The Ruling continues to apply after 30 June 2013 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). 9. The Western Australian Government has announced a proposal to offer monetary compensation to individual Aboriginal and Torres Strait Islanders whose income was controlled or withheld by the Western Australian Government due to the provisions of The Aborigines Act 1905 (WA ) and the Native Administration Act 1905-1947 (WA ). 10. Ex gratia payments will only be made under this scheme if the individual is a living person who: 11. If an individual considers they meet the eligibility criteria they can lodge an application. The Department of Indigenous Affairs will then assess the application to ensure that the applicant meets the eligibility criteria. Once the application is approved, the individual will receive a one off, lump sum ex gratia payment of $2,000. 12. The payment is an ex gratia payment made as an expression or regret by the Western Australian Government, it is not deemed to be a full reparation. 13. The payment is being made to compensate individuals for the impact of past wage control under The Aborigines Act 1905 (WA ) and Native Administration Act 1905-1947 (WA ). It is not intended to be a replacement of income. 14. Lodgement of an application or receipt of the ex gratia payment, will not in any way affect the legal rights which the applicant may otherwise have. 15. Applications can be lodged from 7 March 2012 to 6 September 2012 inclusive. 16. An individual can lodge one application for a payment only. 17. If an applicant dies after his or her application has been lodged, but before a payment has been approved, then subject to the application being complete and subsequently approved, an ex gratia payment will be made to the nominated bank account set out in the application and in accordance with the Administration Act 1903 (WA ) and the Aboriginal Affairs Planning Authority Act 1972 (WA ). 18. The quantum of the ex gratia payment cannot be the subject of a complaint by the applicant. An applicant can however make a complaint on the following grounds: 19. Lump sum payments made to eligible persons by the Western Australian Government under the Stolen Wages Reparation Scheme WA is not ordinary income under section 6-5. 20. There are no CGT consequences under Part 3-1 when an eligible person receives a lump sum payment under the Stolen Wages Reparation Scheme WA. Commissioner of Taxation 13 June 2012 21. A payment or other benefit received by a taxpayer is included in assessable income if it is: | Ordinary income: 22. Subsection 6-5(1) provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). 23. The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics. 24. In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation , [1] the Full High Court stated: 25. Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. [2] Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income. [3] 26. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. [4] The whole of the circumstances must be considered [5] and the motive of the payer may be relevant to this consideration. [6] 27. Payments made under the scheme are one-off lump sum payments in the nature of compensation. Furthermore, payments are not being made as a substitute for any loss of earnings of the eligible individual, but are payments made by the Western Australian government to express regret for past treatment. They do not possess the characteristics of ordinary income. Therefore the payments will not be assessable as ordinary income. | Statutory income: 28. An amount that is not ordinary income may still be assessable income as a result of the operation of section 6-10 which includes statutory income in assessable income. 29. Payments made under the scheme are not assessable as statutory income under any of the provisions in Division 15 or Division 20. | Capital gains tax: 30. There are no CGT consequences when an eligible person receives a payment under the Stolen Wages Reparation Scheme WA. 31. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: 19. Lump sum payments made to eligible persons by the Western Australian Government under the Stolen Wages Reparation Scheme WA is not ordinary income under section 6-5. 20. There are no CGT consequences under Part 3-1 when an eligible person receives a lump sum payment under the Stolen Wages Reparation Scheme WA. Commissioner of Taxation 13 June 2012


Appendix: 21. A payment or other benefit received by a taxpayer is included in assessable income if it is: | Ordinary income: 22. Subsection 6-5(1) provides that the assessable income of a taxpayer includes income according to ordinary concepts (ordinary income). 23. The legislation does not provide specific guidance on the meaning of income according to ordinary concepts. However, a substantial body of case law exists which identifies likely characteristics. 24. In GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation , [1] the Full High Court stated: 25. Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose are likely to be ordinary income, as are amounts that are the product in a real sense of any employment of, or services rendered by, the recipient. [2] Amounts paid in substitution for salary or wages foregone or lost may also be ordinary income. [3] 26. Ultimately, whether or not a particular receipt is ordinary income depends on its character in the hands of the recipient. [4] The whole of the circumstances must be considered [5] and the motive of the payer may be relevant to this consideration. [6] 27. Payments made under the scheme are one-off lump sum payments in the nature of compensation. Furthermore, payments are not being made as a substitute for any loss of earnings of the eligible individual, but are payments made by the Western Australian government to express regret for past treatment. They do not possess the characteristics of ordinary income. Therefore the payments will not be assessable as ordinary income. | Statutory income: 28. An amount that is not ordinary income may still be assessable income as a result of the operation of section 6-10 which includes statutory income in assessable income. 29. Payments made under the scheme are not assessable as statutory income under any of the provisions in Division 15 or Division 20. | Capital gains tax: 30. There are no CGT consequences when an eligible person receives a payment under the Stolen Wages Reparation Scheme WA.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | To determine whether a receipt is of an income or of a capital nature, various factors may be relevant. Sometimes the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes, by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business. | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: ITAA 1997 6-5 ITAA 1997 6-5(1) ITAA 1997 6-10 ITAA 1997 Div 15 ITAA 1997 Div 20 ITAA 1997 Pt 3-1 TAA 1953 Aboriginal Affairs Planning Authority Act 1972 (WA) Administration Act 1903 (WA) Native Administration Act 1905-1947 (WA) The Aborigines Act 1905 (WA) Copyright Act 1968
Case references: Federal Coke Co Pty Ltd v. FC of T 77 ATC 4255 (1977) 7 ATR 519
Subject references: capital gains tax ex gratia payments statutory compensation scheme