Structured Settlements in Australia

Structured settlements are a way of paying compensation for personal injury whereby all or part of the compensation is paid in the form of periodic payments and these periodic payments are funded by the purchase of an annuity. The long process of research and lobbying for structured settlements in Australia is briefly described in Attachment A. On 26 September 2001 the Federal Government announced a tax change to encourage the use of structured settlements. This tax change involves making the annuities purchased by a defendant or its insurer for an injured person tax-free. Structured settlements annuities may now offer injured persons similar weekly payment to those they can obtain on an after tax basis from an expertly managed investment portfolio, but with much better protection against longevity, inflation and financial risks. The relative attractiveness of structured settlements compared with lump sum settlements in Australia is likely to depend upon prevailing market interest rates and sharemarket returns, general awareness and understanding of the benefits of structured settlements and individual preferences. Keywords: structured settlements, compensation, annuities, life expectancies, statutory discount rates