The Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, today announced that Parliament had passed the Taxation Laws Amendment (Structured Settlements and Structured Orders) Bill 2002, allowing seriously injured persons and their advisers to move ahead with structured settlements.
At ministerial meetings convened to discuss the availability and affordability of public liability insurance, Commonwealth, State and Territory Ministers and the President of the Local Government Association of Australia agreed to remove impediments to structured settlements.
Senator Coonan said this legislation gives effect to the Commonwealth's commitment to remove obstacles to structured settlements and structured orders in the tax system.
"The amendments are designed to encourage seriously injured persons to use structured settlements rather than take large compensation payments as a lump sum," Senator Coonan said.
"Structured settlements provide better outcomes for both injured persons and insurers.
"Many people who receive lump sums may be unable to manage those sums, which leads to a shortfall when the money runs out. Regular periodic payments avoid this problem.
"For insurers, structured settlements allow damages awarded to be more closely aligned with a person's actual needs."
Structured settlements will be eligible for an income tax exemption if certain eligibility criteria are met. These eligibility criteria ensure, amongst other things, that the interests of the seriously injured person are protected and that the tax exemption is targeted to those with serious injuries.
The bill extends the income tax exemption to court ordered structured payments if a structured payment satisfies the same condition as the structured settlement.
The measures will apply to assessments for the 2001-2002 income year and later years, in relation to structured settlements or structured orders entered into after 26 September 2001.
Senator Coonan thanked all those who had contributed to the legislation during the consultation process, including the Structured Settlements Group.