5 things you didn’t know about compensation payouts

As lawyers and personal injury compensation experts in business for over three decades, we know all to well, how to always fight for what is right for you, and to claim the most your are due.

However, it’s clear many don’t understand how compensation after an injury works. Here are five things you probably didn’t know about compensation payments…

1. Most of a compensation payout is made up of actual losses. The only portion of a compensation payout that does not reimburse for actual losses is ‘pain and suffering’, otherwise known as ‘general damages’. For an example of an amount payable for general damages, a person who suffers a whiplash or soft tissue neck injury in June 2016 would likely be awarded between $7,200 and $15,750.[A] The remainder of a compensation payout usually represents past and future economic loss, medical and rehabilitation expenses, and care. [B]

2. Most compensation payouts are tax free. Tax is not payable on compensation payouts, and the payout does not need to be disclosed in your income tax return. However, the way in which a compensation payout is used may have tax implications. For example, if you invest the payout and it earns interest, tax is payable on the interest.

3. You may be entitled to part payment of your legal costs. In motor vehicle accident and public liability claims, if a claim resolves for over a prescribed amount, known as a threshold, an injured person is also entitled to an additional amount towards their legal costs. The threshold differs according to the date of the accident. For example, the threshold for an accident in June 2016 is $71,730. The amount of the contribution usually equates to approximately one third, to one half, of an injured person’s total legal costs.

4. Future losses are discounted. In Queensland, future losses must be reduced according to the expectation that the amount claimed will be invested at a rate of return of 5% per annum. The amount is calculated by multiplying the weekly loss by a set number from a table known as the Discount Tables. For example, if someone was to claim a sum of $100 a week for five years, the total sum would be $26,000 (100 x 52 weeks x 5 years). In a personal injury claim, the weekly loss ($100) would need to be multiplied by 231, which is the prescribed number for a 5 year loss. The total sum would therefore be $23,100 (100 x 231).

5. Most claims cannot be assessed until 1 year after an accident. Compensation payouts are designed to compensate a person for losses sustained not only from the date of an accident to settlement, but also in the future. The difficulty is that the future is difficult to predict. Medical specialists are often only able to assess the likely future course of an injury when the injury stabilises, which is usually approximately one year after the initial injury. It is usually not until this time that a lawyer can advise you as to the likely amount of a compensation claim.

Sources:

[A] See Litigation tables
[B] There are exceptions for intentional acts such as assault.