income protection - lump received - opinions sought

hello, have spent a few hours searching but havent found definitive answer & was hoping a member may have knowledge or can suggest where I could investigate further.

I have had an income protection claim finally negotiated to a satisfactory outcome. receiving lump sum for approx 80% of claim (arrears to dec 2008)+legal costs+now on claim.

my accountant is of the opinion it would all be assessable in ye 14, I would like a 2nd opinion

I have a spreadsheet that attributes income (lump sum apportioned for each month)/interest/premiums monthly since dec 2008, so it would be pretty easy to allocate the lump sum received (minus legal fees) to each tax return. (ie ye09, ye10, ye11, ye12, ye13).


for some reason (optimism?) i was of the opinion ato would very likely reassess my prior tax returns & include the new income, rather than assess the lump sum (-legals) all in ye14

I believe I need to request a private ruling, and that would most likely be granted in my favour.

Is this so or am I dreaming?

I appreciate all thoughts

regards
adrian
 
Amounts paid in substitute for ordinary income would themselves be ordinary income.

Employees and passive investors would derive ordinary income on a cash basis, i.e. when received or constructively received (e.g. credited to your account).

Where not ordinary income, s.15-30 would assess amounts "received". This word is not defined in the legislation so it would take its ordinary meaning. This would ordinarily be physical or constructive receipt as well.

Merely believing you have a right to claim and starting dispute/claim proceedings does not equate to being received either physically or constructively unless there is something unusual about the contract.

The costs of insurance premiums would be deductible in the year paid.

The costs associated with making a claim again would normally be deductible in the year paid/payable unless of a capital nature (unlikely).

There is a time limit on amending tax returns normally of 2 years for individuals with simple tax affairs, or 4 years for more complex (such as being a trust beneficiary). Check that your incidental and legal costs are not out of amendment period if not already claimed.

Can't hurt to get a pbr, but get a tax agent to draft it clearly to make sure all your essential points are answered.

Rob
 
Thanks for your helpful advice.

I have spoken with ato income protection specialist, who advised if lump sum in arrears it would be considered in relation to previous tax returns, if not lump sum in arrears (evidently stipulated on paperwork that accompanies lump sum payment) then I could (should?) request private ruling.

Don't hold up lodging your ye12, and dont include on ye13, include in ye14 (there a special place - 24.5? - on the tax return)

cheers
Adrian
 
Lump sum in arrears usually refers to back payments of accrued salary and wages or workers compensation payments.

Income protection insurance taken out by you independently would normally cover income that has been foregone rather than the accrued amounts due from an employer.

Unless there is something unusual about your policy.

Rob
 
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