In a decision handed down on Fri 12.9.2014, the AAT has affirmed a decision of the Commissioner that a payment made to a taxpayer for compensation for domestic assistance was assessable as ordinary income under s 6-5 of the ITAA 1997.

  • In February 1997, the taxpayer’s husband suffered a serious injury while white water rafting during a team building exercise organised by his employer.
  • The husband was unable to work and the taxpayer gave up full time work to become a carer.
  • In June 2012, the husband lodged a claim for compensation for domestic assistance under s 60AA of the Workers Compensation Act 1987 (NSW) in respect of the domestic assistance that the taxpayer had provided to her husband during the period between 1 January 2002 and 12 April 2012.
  • In November 2012, the Workers Compensation Commission (WCC) awarded the taxpayer the sum of id=”mce_marker”79,166 (“the Compensation Payment”).
  • The taxpayer received the Compensation Payment as a lump sum in the 2013 income year and lodged a private ruling application with respect to the payment.
  • In July 2013, the Commissioner issued a private ruling stating the Compensation Payment was assessable income for the purposes of s 6-5 of the ITAA 1997.
  • The taxpayer objected and the Commissioner disallowed the objection in full.

Having regard to the case law, the facts referred to in the ruling application and specifically the manner in which the WCC determined the amount to be paid in compensation, the Tribunal concluded the Compensation Payment received was assessable as ordinary income under s 6-5.

(AAT Case [2014] AATA 664, Re Riley and FCT, AAT, Ref No: 2014/0374, Deutsch DP, 12 September 2014.)

[LTN 177, 12/9/14]