Zaghloul and Commissioner of Taxation (Taxation)

This matter concerned an appeal by the applicant, Dr Zaghloul, against the Commissioner of Taxation's decision to disallow his objection to his income tax assessment for the year ended 30 June 2017. The dispute centred on whether a lump sum payment of $118,924 received by the applicant from his former employer, Woodside, was assessable income or a capital payment. The applicant argued the payment was capital in nature and therefore not assessable, or alternatively, exempt.

The Administrative Appeals Tribunal was required to determine the proper characterisation in law of the $118,924 payment. Specifically, the Tribunal had to consider whether the payment, which arose from a workers' compensation claim under the *Workers' Compensation and Injury Management Act 1981* (WA), constituted assessable income under the *Income Tax Assessment Act 1997* (ITAA 97), or if it fell within any exemptions, such as those relating to structured settlements or personal injury lump sums.

The Tribunal reasoned that the payment, despite being made as a lump sum, was by its nature income. The applicant had not elected to receive a lump sum payment for permanent impairment under section 31C of the *Workers' Compensation and Injury Management Act 1981*. Instead, the payment represented the total of weekly compensation payments ordered by the Workers' Compensation Arbitration Service to compensate the applicant for loss of income during his period of incapacity. The Tribunal noted that the applicant himself had argued before the Arbitration Service that any weekly payment of compensation, whether paid weekly or as a lump sum due to back-payment, was taxable. Therefore, the Tribunal found that the payment was assessable income.

The Tribunal affirmed the respondent's decision dated 7 December 2018, which disallowed the applicant's objection. The gross payments totalling $118,924 were found to be assessable income of the applicant for the year ended 30 June 2017.