The information on this page is for general guidance only and does not constitute professional tax advice.
Key information
- Insurers withhold tax from your weekly statutory benefits.
- You must complete the Tax File Number (TFN) declaration to set your tax withholdings correctly.
- Certain loans may influence the amount withheld.
- Exemptions may apply – see the ATO website for more information.
- After 78 weeks, payments are viewed as capital assets with no tax withheld.
For more information, contact the Australian Taxation Office on 13 28 65 or your tax advisor.
When will your tax be withheld?
0-78 weeks after your accident
| Type of Resident | Will tax be withheld? | Rate at which tax will be withheld |
|---|---|---|
Australian residents (except for at fault CTP policy holders) | Yes | Applicable individual income tax rates |
CTP policy holder for the vehicle the claim is lodged against | No | N/A |
Overseas residents | Yes | Applicable foreign resident income tax rates or working holiday maker tax rates |
After 78 weeks from your accident
| Type of Resident | Will tax be withheld? |
|---|---|
Australian residents | No – weekly benefits calculated on a net amount per week with no tax remitted to the ATO |
Overseas residents | No – weekly benefits calculated on a net amount per week with no tax remitted to the ATO. |
No tax file number declaration
| Type of Resident | Will tax be withheld? | Rate at which tax will be withheld |
|---|---|---|
Australian residents | Yes, weeks 0-78 after the accident | Top rate of tax plus Medicare levy |
| Overseas | Yes, weeks 0-78 after the accident | Applicable foreign resident income tax rates |
Why you need to complete a tax file number declaration after a motor crash injury
If you’re injured in a motor crash and eligible for weekly statutory benefits, your insurer will send you a tax file number (TFN) declaration for you to complete and return. The TFN declaration can also be downloaded from the ATO website. This declaration ensures the insurer withholds the correct amount of tax from your payments and covers any applicable study and training support loans such as:
- Higher Education Loan Program
- VET Student loan
- Financial Supplement
- Student Start-up Loan
- Trade Support Loan
You must submit this declaration before your weekly payments commences. Failure to do so means the insurer will legally withhold the maximum tax rate plus the Medicare levy from all payments made to you.
Note: Some people are exempt from providing a TFN declaration – see the ATO website for more information.
Why your insurer withholds tax from your weekly benefits
The insurer withholds tax from any weekly payments up to the end of week 78 and pays it directly to the Australian Taxation Office (ATO). The amount of tax withheld is calculated based on whether your payments compensate for total or partial loss of earnings.
- Total loss of earnings: As these payments are a replacement for your lost earnings, the insurer will withhold the applicable taxation amount as at the time of payment. The insurer will consider any tax-free threshold when calculating your payments.
- Partial loss of earnings: If these benefits are your only income from an employer, the insurer treats them as if they are from a ‘second employer’ and typically does not apply the tax-free threshold unless requested via the TFN declaration.
Additional withholdings may apply if you have a study and training support loan or if you are not an Australian resident, in which case the ‘non-resident tax rate’ is applied. If your taxation circumstances are unusual, such as being an Australian Defence Force personnel, contact the insurer or the ATO for further advice.
At the end of each financial year, the insurer will provide a 'PAYG payment summary' reflecting these deductions.
If you are the CTP policy holder
If you are injured in a crash and hold the CTP policy for the vehicle the claim is lodged against, the insurer will not withhold tax from your weekly benefits payments.
Contact the insurer or the ATO if you have any questions about the taxation implications
What happens after 78 weeks?
After 78 weeks, if you continue to receive payments for loss of earning capacity, these are calculated on a net basis per week and not subject to tax deductions. These benefits are considered a capital asset rather than income. For legal precedent and detailed explanations, see Allianz Australia Insurance Ltd v Jenkins [2020] NSWSC 412.
More information
Contact CTP Assist on 1300 656 919 or ctpassist@sira.nsw.gov.au for assistance with the claims process or contact the ATO for help understanding your tax obligations.
Updated 20 December 2024