The AAT has affirmed the Commissioner’s decision that lump sum payments received by a taxpayer that was connected to a pension paid by the UK Government was ordinary income in her hands and therefore should be assessed accordingly.
The taxpayer was in receipt of a pension from the UK Government. The taxpayer’s pension was connected to the pension paid to her husband, who after negotiations with his former employer, became entitled to payments of lump sums in the 2008-09 and 2009-10 income years. The lump sums reflected an adjustment to the rate of the pension that was backdated. The taxpayer also received similar adjustments to her pension. The pensions would have been exempt from UK tax if the amounts were paid in the UK.
The issue before the Tribunal was whether, given the money was received in Australia, should it be taxed here. The taxpayer argued there were “exceptional circumstances”.
However, the Tribunal said there was no general “special circumstances” discretion. The Tribunal accepted the Commissioner’s submission that the payments were income under the general rule and there was no specific exception that would take them out of consideration. Accordingly, the Tribunal affirmed the Commissioner’s decision that the lump sums received were assessable under s 6-5 of the ITAA 1997 as ordinary income.
(AAT Case [2013] AAT 657, Re Harrison and FCT, AAT, Ref Nos: 2013/2004, 2013/2005, McCabe SM, 26 August 2013.)
[FJM Note: The ‘general rule’ to which the Commissioner referred in his submissions was no doubt the principle that a substitute for income is also income.]
[LTN 181, 18/9/13]