EV 1051990178374currentnon-binding advice

Assessable income - lump sum insurance payment

Non-binding edited private advice. This is an edited version of private advice the ATO gave to a specific taxpayer about their own circumstances. You cannot rely on it — it is not binding and provides no protection for anyone else (see PS LA 2008/4). Use it as a guide to the ATO’s thinking, not as authority.

1

Will the lump sum Permanent Disablement benefit be included in your assessable income?

2

No. The Permanent Disablement benefit is intended to compensate the policy owner for the loss of earning capacity. The benefit is a capital receipt and will not be assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 118-37 of the ITAA 1997 disregards a capital gain where the capital gains tax (CGT) event happens in relation to compensation or damages you receive for any wrong, illness or injury suffered. Therefore, no CGT consequences will arise. In summary, the lump sum Permanent Disablement benefit will not be included in your assessable income as it is not ordinary income or statutory income. This ruling applies for the following periods : Year Ending 30 June 20XX Year Ending 30 June 20XX The scheme commences on: 1 July 20XX

3

You had an accident that resulted in a serious medical condition. You are currently receiving monthly income protection benefits under an insurance policy. Doctors do not expect any positive rehabilitation or possibility of returning to work. The insurance provider has advised you are eligible to exercise the permanent disablement benefit option within your policy and obtain a lump sum benefit amount.

4

Income Tax Assessment Act 1997 section 6-5. Income Tax Assessment Act 1997 section 118-37.