I have been advised that income tax is payable on an income protection insurance lump sum payment (-legal costs) in the year it is received.
Does whether the lump sum was negotiated prior to Court or decided at Court have any bearing how the ATO views the lump sum payment? ie as income in that tax year. I doubt it but would like to know for please?
It seems patently unfair that it takes 5 years to get to Court, the lump sum is to reimburse the 5 year lost income period, but the ATO say nope, we'll have (almost ) half, thankyou. ie the ATO tax the 'income' when it is received.
The insurance company pays the lump sum to the law firms trust fund. What if half the lump sum payment (-costs) was dispersed to the client in June and the rest in July? ie spread the payment over 2 tax years. Or would the ATO say it's the date when the lump sum was received by the trust fund?
Greatly appreciate helpful advice,
cheers
bill
Does whether the lump sum was negotiated prior to Court or decided at Court have any bearing how the ATO views the lump sum payment? ie as income in that tax year. I doubt it but would like to know for please?
It seems patently unfair that it takes 5 years to get to Court, the lump sum is to reimburse the 5 year lost income period, but the ATO say nope, we'll have (almost ) half, thankyou. ie the ATO tax the 'income' when it is received.
The insurance company pays the lump sum to the law firms trust fund. What if half the lump sum payment (-costs) was dispersed to the client in June and the rest in July? ie spread the payment over 2 tax years. Or would the ATO say it's the date when the lump sum was received by the trust fund?
Greatly appreciate helpful advice,
cheers
bill
