Seahorse

Hi there,

We are in the process of emigrating and was wondering about the following.

I was involved in an accident some years back and it's now getting to the point of settlement (in the UK).

Will I have to pay tax in the UK or Oz - we will probably be in Oz by the time it is finally concluded. Or would I have to pay in both?

Does it depend on the amount?

Thanks in advance

JAJ

It depends on what the Australian tax code says about 'accident compensation' - in many countries this is not considered to be income.


Jeremy

ABCDiamond

Example info from the ATO


Person injured while overseas
While holidaying overseas, Phil was severely injured in a motor vehicle accident. He has returned to Australia. Phil seeks compensation from the driver of the other car under the laws of the nation where the accident occurred. The other driver is insured and the insurance company reaches an agreement with Phil. Under the terms of the agreement, the insurance company pays an immediate lump sum of $300,000 to Phil and purchases a personal injury annuity of $25,000 per year from an Australian life insurance company. This annuity will be paid monthly and indexed to the CPI.

The lump sum payment and the personal injury annuity are exempt from income tax. However, if the annuity had been purchased from a foreign life insurance company that was not registered under the Life Insurance Act 1995, the annuity would not qualify for exemption from income tax.

Seahorse

I am insured through my contents insurance so have not had to pay UK legal costs, thank goodness.

So, as far as you aware, if the settlement is reached when we arrive in Oz, we won't have to pay tax on it?

ABCDiamond

If you check the link above, to the ATO page, it does appear to say that it would not be taxed, if the circumstances are in any way similar to yours.

I have always assumed that compensation payments such as this, are NOT taxable.

The change in value of the capital sum, from date of payment to the date of reciept in Australia, may attract tax on any gain you make.

Alan Collett

I quote from one of the books in my tax library:

"Periodical payments received by a taxpayer during a period of total or partial disability under a personal accident, income protection, or disability insurance policy taken out by the taxpayer are assessable on the same principle as workers compensation, ie they are assessable where they are paid to fill the place of lost earnings. This also applies to lump sums paid to settle all outstanding claims under the policy."

I think the key may therefore be the nature of the compensation that will be paid ...

Best regards.

NedKelly

Do you expect to pass the medical?

Seahorse

Yes and already have Visas.

Thanks to everyone for info.