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ATO Interpretative Decision

ATO ID 2002/583 (Withdrawn)

Income Tax
Assessability of lump sum - part of compensation paid to spouse

Attention This ATO ID is withdrawn. The view contained in the ATO ID expresses a straight application of the law. Guidance relating to the issue is addressed in web content Other income (QC 31968) and Amounts that you do not pay tax on 2017 (QC 51059).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 11 August 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Is the taxpayer assessable under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) on an amount received, out of a compensation payment to their spouse, in recognition of the care they provide to their spouse?


No. The taxpayer is not assessable under subsection 6-5(1) of the ITAA 1997 on an amount received, out of a compensation payment to their spouse, in recognition of the care they provide to their spouse as the amount is not ordinary income.


The taxpayer's spouse was injured in an accident as a result of which they were incapacitated.

The taxpayer provides ongoing care and support for their spouse.

The taxpayer's spouse took legal action and was awarded compensation for their injuries. The taxpayer was not a party to this legal action.

The court made an order that an amount be paid to the taxpayer, out of the compensation payable to the spouse, in recognition of the care they have provided and will provide to their spouse.

Reasons for Decision

Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts, which is called ordinary income.

Ordinary income has generally been held to include three categories, namely income from rendering personal services, income from property and income from carrying on a business.

Income from personal services is income that an individual taxpayer earns predominantly as a direct reward for their personal efforts by, for example, the provision of services, exercise of skills or the application of labour (paragraph 3 of Taxation Ruling IT 2639).

Other characteristics of income that have evolved from case law include receipts that:

 are earned;
 are expected;
 are relied upon; and
 have an element of periodicity; recurrence or regularity.

The taxpayer does not have an employment relationship with their spouse and therefore they did not receive the payment in the capacity of an employee.

Further, the amount the taxpayer received was for the care and support they provided to their spouse out of love and affection and cannot be described as a direct reward for their personal efforts. The taxpayer's spouse is not paying for the services the taxpayer provides. The amount was more in the nature of an ex-gratia payment or gift to the taxpayer in recognition of the assistance and support they provided and will continue to provide to their spouse.

The payment is also a one off payment and thus does not have an element of recurrence or regularity.

The lump sum payment received by the taxpayer is not income according to ordinary concepts and is therefore not assessable under subsection 6-5(1) of the ITAA 1997.

Amendment History

Date of Amendment Part Comment
27 March 2015 Related Public Rulings Added reference to relevant TD 2004/75

Date of decision: 18 April 2002

Year of income:Year ending 30 June 2002

Legislative references:
Income Tax Assessment Act 1997
   subsection 6-5(1)

Related Public Rulings (including Determinations)
Taxation Ruling IT 2639
Taxation Determination TD 2004/75

Compensation income
Lump sum payments
Personal services income

Siebel/TDMS reference number: DW390067;1-BKRQPN0

Business line: Small Business/Individual Taxpayers

Date of publication: 31 May 2002

ISSN: 1445-2782

ATO ID 2002/583 (Withdrawn) history   Top  
   Date   Version 
   18 April 2002   Original statement   
   27 March 2015   Updated statement   
 You are here ®  11 August 2017   Withdrawn   


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