Is my compensation payment taxable?
No, your compensation and damages settlement payment or award is not taxable.
This means that you are not required to disclose your compensation or damages payment achieved from your personal injury claim, in your tax return when lodging it with the Australian Taxation Office.
To quote the tax office:
“A payment does not need to be made as a result of proceedings before a court to be deemed as compensation – however, the employee or employer should keep evidence to show that a genuine dispute existed.”
We explain more further below and answer more of your questions…
Can I get injury compensation?
Is income made from my claim payment taxable income?
For example, if you receive your compensation payment at the conclusion of your personal injury claim. Then you use your settlement funds to start up your own business as say a courier driver.
Any income you make from the courier business is taxable income that you must declare in your taxation return and to the ‘Taxman’.
What if I place compensation into a bank account so it will earn interest?
Again the interest earned is income and it will need to be declared in your taxation return when lodging it with the Australian Taxation Office.