What happens after settling a personal injury claim? Your frequently asked questions

Do you pay tax on compensation payouts in Australia?

Generally, personal injury compensation payments are not taxable in Australia. However, there are some important considerations:

• The primary compensation amount is tax-free
• Interest earned on your settlement after receiving it is taxable
• Any portion specifically allocated for lost income might have tax implications
• Investment returns from your compensation are taxable.

We recommend consulting a tax professional about your specific situation, especially for larger settlements where investment planning is important.

What happens with Medicare after my settlement?

Medicare must be refunded for any medical treatments they funded related to your injury once you receive compensation. This process is important to understand as the amount is deducted from your final settlement sum.

What exactly gets refunded to Medicare?

Only treatments related to your injury need to be refunded.

For example:

• If Medicare paid $300 for injury-related physiotherapy and $150 for an unrelated dental check-up, only the $300 physiotherapy payment needs to be refunded
• Regular health checks or treatments for unrelated conditions aren’t included
• The refund only applies to Medicare-funded treatments between your injury date and settlement
• Out-of-pocket medical expenses are not included in what is refunded to Medicare.

What do I need to know about Medicare and my settlement?

When you receive a settlement, Medicare must be notified, as they may require reimbursement for any medical expenses they covered related to your injury. In Australia, this notification must be made within 28 days from the date of the judgment or settlement.

Your personal injury attorney (such as your lawyer at GMP Law) is responsible for notifying Medicare of your settlement. This includes issuing a Notice of Charge, if necessary, and coordinating the reimbursement process. A Notice of Charge is a document from Services Australia that informs you of their claim to recover the costs of Medicare benefits paid for your treatment from any compensation or settlement you receive.

What is the process of notifying Medicare?

Here’s an overview of the process:

1. Medicare History Statement: The lawyer will request a Medicare History Statement from Medicare, which lists all treatments Medicare funded in relation to your injury.
2. Identify injury-related treatments: You will then identify which treatments from the statement are directly related to your injury.
3. Reimbursement: Based on the identified treatments, Medicare will calculate the total refund amount, which is typically deducted directly from your settlement funds.

Your lawyer will guide you through these steps to ensure everything is managed properly and that all Medicare-related matters are resolved before your settlement is finalised.

How is the Medicare refund calculated?

There are two possible scenarios for how Medicare calculates the refund amount:

1. If there is a valid Notice of Charge before settlement:
   • You will receive a Medicare History statement listing all treatments Medicare has funded
   • You’ll identify which treatments are injury-related
   • Medicare calculates the refund amount based on these treatments
   • The refund amount is paid directly from your settlement funds.
2. If there is no valid Notice of Charge at settlement:
   • 10% of your total settlement is automatically paid to Medicare as an advance
   • You will then receive a Medicare History Statement and identify the injury-related treatments
   • If the final refund amount is less than the advance, Medicare will refund the difference
   • If the final refund amount is greater than the advance, you must pay the difference within 28 days.

Your GMP Law personal injury lawyer will issue the Notice of Charge and handle all the required steps to ensure the Medicare repayment process is completed efficiently.