At Owl Financial Management, we provide a service to assist in assessing your compensation claim.
What happens if you are offered a worker’s compensation payment?
What do you do with the money that you are offered?
What are the overall financial implications of receiving a payment?
To ensure that recipients of worker’s compensation payments are aware of all their rights, responsibilities and financial obligations, the payment authorities have stipulated that before receiving any payment, a recipient must confirm that they have received both legal and financial advice. The legal and financial advice must be signed off by an authorised legal officer and financial adviser before any payments are finalised and subsequently paid to the recipient.
To ensure that advice is sought by the recipient, the payment authority will provide funding to cover the cost of the consultations with legal and financial practitioners. This process ensures that recipients WILL obtain advice are not put off receiving help due to the perception of advice costing them too much.
When a financial adviser meets with a recipient, they will normally provide general advice only. General advice is the provision of general information relating to the overall situation and not taking the person’s specifics into account. When looking at worker’s compensation payments, general advice is normally easy to provide as the financial adviser will simply give the recipient the facts about how the payment(s) affect a person’s situation.
Financial advisers will normally cover subjects including taxation, Centrelink, Medicare and possible employment termination.
Whilst redemption payments are generally not taxable, a financial adviser will be able to provide full information relating to what is and what is not taxable in the form of a worker’s compensation redemption payment.
Centrelink may impose waiting periods on the receipt of benefits applied for by a redemption payment recipient. If planning on applying to Centrelink it may be prudent to get the full perspective on how a compensation payment will affect your ability to firstly make a claim and secondly, how your claim will potentially be impacted.
It is important to ensure that Medicare is advised of the progress of a claim and the information relating to a claim. Medicare will potentially seek to claim any of their medical payment costs from the payment authority and therefore it is important to ensure that all parties are in constant communication during the settlement process to ensure that once a final payment is made, Medicare do not look to recover any of their costs from the payment recipient.
In the event of a worker terminating their employment due to a compensation claim, they will normally receive any outstanding leave entitlements paid to them. Appropriate tax advice is required to understand how this will be taxed in the eyes of the recipient.
As you can see, the receipt of a worker’s compensation payment is not a simple and clear cut process. It is important that advice is sought from a legal practitioner so that all bases are covered when dealing with an employer and the payment provider. Just as important as legal advice, it is important that you understand what the financial implications of a payment or redemption are. Tax, Centrelink and Medicare are big considerations when accepting benefits in the form of worker’s compensation payments.
For these reasons, before signing off on an agreement, it is best to have all bases covered. A qualified financial planning practice like Owl Financial Management can help you to understand all the important areas when it comes to worker’s compensation payments.
Owl Financial Management – An Adelaide Based Financial Planning Business