Structured settlements - information for injured people

How are structured settlement payments taxed?

The personal injury annuity and personal injury lump sum payments that you receive from a structured settlement are tax exempt or tax-free.

You can take part of your compensation in the form of an immediate lump sum. This money will be tax-free at the time that you receive it. But if you invest that money for future use and receive dividends or interest on that investment, these earnings will be taxed as income.

If you only receive tax-exempt personal injury annuity and personal injury lump sum payments you will not be required to lodge a tax return. However if you have other sources of income or receive interest or dividends you may need to lodge a tax return. If you are required to lodge a tax return, do not include payments made to you under a tax-free structured settlement in your tax return.