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Edited version of private advice
Authorisation Number: 1051997115040
Date of advice: 23 June 2022
Ruling
Subject: Lump sum payment
Question 1
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)?
Answer
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.
Question 2
Is the critical illness benefit payment exempt from capital gains tax under section 118-37 of the ITAA 1997?
Answer
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.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
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
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