The Minister for Revenue and Assistant Treasurer Senator Helen Coonan announced that legislation was introduced into Parliament today to encourage the use of structured settlements to compensate accident victims.
Structured settlements involve compensating seriously injured persons with regular payments over their lifetime rather than as a one off lump sum.
The Taxation Laws Amendment (Structured Settlements) Bill 2002 will provide an income tax exemption for annuities and deferred lump sums paid as compensation to seriously injured persons under structured settlements.
The proposed laws follows two successful Ministerial Meetings on Public Liability Insurance held in March and May 2002 where Commonwealth and State and Territory Ministers recognised that structured settlements give injured people greater security about their future income and their capacity to meet ongoing medical expenses.
The Commonwealth has moved quickly to implement these changes. Structured settlements is one of the areas in which the Federal Government can play a role in addressing the public liability problems facing the Australian community.
Senator Coonan urged the States and Territories to continue working quickly to resolve the issues within their own jurisdictions.
"The Government recognises the importance of encouraging structured settlements, as one of a range of measures to address difficulties associated with the availability and affordability of public liability insurance," Senator Coonan said.
"This Bill will provide better outcomes for both claimants and insurers facing large payouts.
"Many people who receive large lump sums as damages for personal injury may be unable to properly manage the investment of the lump sums.
"This can result in the early dissipation of compensation payments, leaving an injured person unable to provide for his or her future needs. Regular periodic payments avoid these problems.
"Structured settlements also help to more closely align the damages awarded with a person's actual needs."
"There are cases of windfall payouts where courts overestimate the lump sums required and cases of shortfall payouts where lump sums proved inadequate for the long term care of the injured person."
"I would like to see a system where these seriously injured people are cared for and the needs of the community are met. Where there are no windfalls and no shortfalls.
"In addition to the Commonwealth's Bill, State and Territory Ministers have agreed to introduce legislation to remove the barriers to structured settlements as an alternative to lump sum payouts - and in some cases have already done so."
Today's legislation is a result of extensive consultation with the Structured Settlements Group, which represents a broad range of interested organisations.
A statutory review of the operation of the tax exemption is to be undertaken no later than five years after the date of commencement.