Is there tax on personal injury settlements?

The answer is no.  Compensation and damages payments are not taxable.  It is not considered to be “income” for the purposes of assessing income tax.  The payment is tax free.  You do not need to disclose your compensation payment to your accountant or to the ATO in your income tax return.  There is no Capital Gains Tax payable on a personal injury settlement either.

If however you invest your settlement money and earn interest or other income on the investment, you will be required to declare that income to the ATO.

The weekly benefits that you may receive from WorkCover or your income protection insurer are taxable and should be disclosed.

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