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If you’ve suffered an injury and have made a claim for personal injury or public liability, one piece of good news is that most lump sum compensation payments are tax free.

But before you start celebrating, you need to consider whether other statutory bodies might have an interest in your compensation, or seek to recover any amount paid to you after you’ve been injured.

Workers Compensation

If you’re receiving regular workers compensation payments, you should seek advice from a taxation accountant.

Weekly income maintenance payments are taxed just like ordinary income. This will include a lump sum income maintenance payment that is made to you in arrears. On the other hand, a lump sum payment for permanent disability may not be subject to income tax.


Since your injury, you may have been receiving Centrelink Payments. If you are then awarded compensation, Centrelink will likely seek to recover payments that it has made to you.

The manner in which Centrelink calculates how much it will seek to recover from you depends on various factors and is calculated using a prescribed formula.

Before agreeing to accept any lump sum payment of compensation or damages you should seek legal advice. This will help to ensure that you understand how any Centrelink recovery might impact on the amount of money you are likely to receive.


If you have had medical treatment as a result of your injury, you may be required to repay Medicare the full amount of their costs for the period in which your injury has been treated. Medicare will issue a Notice of Charge which will allow it to deduct money from your compensation if the insurer hasn’t offered to make any payment towards your previous treatment.

If you are entitled to workers compensation as a result of the injury, you might be able to claim the amount of any Medicare charge. This type of claim should be made to the workers compensation insurer. It will depend on the status of your workers compensation claim and so it is essential to speak to a lawyer about this.

Before any injury compensation is paid to you, you should seek legal advice from a compensation lawyer about how a payment may impact your other benefits. Websters Lawyers has an outstanding team of public liability and personal injury lawyers who can help. Contact us today for a free initial consultation and enquire whether a No Win No Fee arrangement applies to you.


It doesn't cost you anything to know where you stand

*Please note: Websters lawyers is a South Australian based law firm, handling matters exclusive to South Australia, with offices located in Adelaide, Ridgehaven and Smithfield.

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