Understanding Injury Taxation 

Injury taxation is intended to assist injured workers in comprehending the Australian Taxation Office (ATO) guidelines regarding specific benefit payments for Pay-As-You-Go (PAYG) purposes.

Important Note:This content provides general information only and should not be considered as taxation advice. It does not exempt you from examining applicable taxation guidelines and rulings to determine their relevance to your specific benefit payment circumstances. WorkCover Queensland cannot offer precise advice on the income tax treatment of benefit payments without additional information about your situation. It is recommended that you seek advice from the ATO or a registered tax agent.

Tax File Number (TFN) Declaration:The ATO and WorkCover, authorized by the Taxation Administration Act 1953, may request your (or their dependent's) tax file number (TFN). While it's not mandatory to provide your TFN, quoting it reduces the risk of administrative errors and extra tax withholding. If your TFN is not provided, WorkCover is obligated to withhold the top tax rate from all payments made to you.

Injured workers can complete a TFN Declaration using Worker Assist, eliminating the need to print and sign forms. Alternatively, you can download the TFN Declaration (PDF, 0.08 MB) and submit it to WorkCover.

PAYG Tax Withholding:WorkCover is required to withhold an amount from weekly compensation payments based on specified policies and remit it to the ATO. TFN Declarations guide the withholding process. WorkCover issues a PAYG Payment Summary annually, specifying the payments made and tax withheld. This information must be included in your assessable income on your tax return.

Part-Year Payment Summaries:A written request to issue a part-year PAYG Payment Summary should be submitted to WorkCover before June 9 (21 days before the financial year ends).

Lump Sum Payments:Lump sum payments for permanent injuries are typically not included in assessable income. However, lump sum payments related to weekly compensation payments in arrears may be included as Lump Sum Component E in the PAYG Payment Summary.

Payments to Dependent Children:Weekly benefits for dependent children are taxed at normal PAYG rates, not the higher rates applicable to other income types for taxpayers under 18, unless the child is a non-resident for tax purposes.

Common Law Settlements: According to Section 270(1) of the Workers' Compensation and Rehabilitation Act 2003 (the Act), the total sum owed in common law damages is decreased by the aggregate amount disbursed to the claimant as compensation under the Act. This reduction encompasses weekly compensation and any other disbursements previously provided to the injured employee. WorkCover recovers gross amounts paid as common law damages. A 'Fox v Wood' claim may be made for additional tax paid. The nature of compensation payments does not change for tax purposes.

Third-Party Recoveries:WorkCover may recover claim costs from a third-party insurer without amending PAYG Payment Summaries.

Overpayments:Overpaid amounts must be repaid, and if discovered in a later financial year, the gross amount (including tax withheld) is repaid. WorkCover may issue amended PAYG Payment Summaries in such cases.

Note: WorkCover has received advice from the ATO regarding these matters.