Newsletter
November 2014 Newsletter
Compensation for providing domestic help taxable
The AATl has affirmed a decision of the Commissioner that a payment made to an individual for compensation for domestic assistance was assessable as ordinary income under the tax law.
In 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 2012, the husband lodged a claim for compensation for domestic assistance under the Workers Compensation Act 1987 (NSW) in respect of the domestic assistance provided by the taxpayer. The Workers Compensation Commission awarded the taxpayer a lump sum of around $179,000.
The AAT said there was no basis that the compensation payment could be described as a loss of income earning capacity as argued by the taxpayer – rather, it was of the view that the payment was to ensure that the taxpayer was provided with a sufficient payment to cover her loss of income.