March 21, 2016

Accident payments that arise through insurance or disability cover – whether or not another party is at fault – can be awarded as a lump sum or ongoing periodic payments.

Lump-sum payments are the norm but they must be wisely invested to ensure they endure for the injured lifetime. Periodic payments or annuities can also be arranged in some cases.

So…is my payment taxable?

No. Lump sum payments are tax exempt in Australia. This means that you won’t pay any tax on settlement amounts from accident or disability insurance claims.

Why not?

Compensation payments for accident or disability are considered to be capital sums rather than income. Capital is not taxable so this amount is exempt from taxation.

What if I decide to invest part of the lump sum?

If you invest some of your settlement payment for future use and receive interest or dividends on that investment, these earnings will be taxed as income.

If you have other questions about this or need general advice, call us anytime on 07 3210 3437.

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