Flag the capital-gains disregard and leave ordinary income blank
MaintainedLast reviewed
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Flag a compensation receipt against the capital-gains disregard in section 118-37, and leave ordinary-income questions blank. Do not write tax advice to the client.
- What the lawyer must review
- The disregard is of a capital gain or loss, not of ordinary income
- Do not decide that a weekly benefit or a lump sum is income
- Do not write tax advice for the client
Rules that apply
The document starts from the task name. Change it if this piece of work is different.
The work product
Forum. New South Wales
Produce. A flag that the capital-gains disregard may apply, with ordinary income left blank.
Have ready. The receipt the lawyer has identified; Whether the lawyer says it is compensation or damages for a personal injury.
Example of the limit. Illustrative example: The receipt is a damages lump sum for injury. The flag cites section 118-37(1)(a). The ordinary-income cell stays blank.
Stop and hand it back when
- The tool would tell the client the lump sum is tax-free.
- The receipt is not compensation or damages for injury.
Sources for this task were checked on 2026-10-23.
Who does what
| Role | What they do |
|---|---|
| Assistance | Flag a compensation receipt against the capital-gains disregard in section 118-37, and leave ordinary-income questions blank. Do not write tax advice to the client. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Section 118-37(1)(a) disregards a capital gain or capital loss from a CGT event relating directly to compensation or damages received for any wrong or injury suffered in the person's occupation, or for any wrong, injury or illness the person or a relative suffers personally.
- The same disregard can apply to compensation or damages a trustee receives for a beneficiary, other than a trustee of a complying superannuation entity: section 118-37(1)(b). Do not apply that paragraph unless the lawyer says the receipt is by a trustee.
- The section does not say that a weekly statutory benefit, a workers compensation payment, or a damages lump sum is, or is not, ordinary income. Leave that question blank.
- The flag is not advice to the client. It does not calculate tax.
Forms and precedents for this task
| Form or precedent | Kind | AI use | Summary |
|---|---|---|---|
| Client checklist after a personal injury settlement | Checklist | AI use Yellow | What a client does after a personal injury settlement is signed: Medicare, Centrelink, the NDIS, tax, and money held for a child. |
Signed-in accounts can read the full text of each one. All precedents.
Sources
- Income Tax Assessment Act 1997 (Cth), section 118-37 · 2026-10-23
- Motor Accident Injuries Act 2017 (NSW), in force from 10 July 2026, section 4.5 · 2026-10-23
Health and wage records stay in a firm-controlled tool. The lawyer applies ASCR r 9 and APP 11, and decides whether any breach is notifiable under the Privacy Act 1988 (Cth).
No ruling was opened on whether a particular New South Wales benefit is ordinary income.