In Australia, the safety of each worker is very important, mentally and physically. A workplace should have health and safety rules and regulations which require all workplaces to be safe and worker’s to be entitled to a safe work environment. It is compulsory for employers to have their employees covered in case the employees get sick or injured at work. Workers compensation insurance is the type of insurance to get.

Each state and territories in Australia have a different scheme and may be governed by different laws and vary in way.

Workers compensation is provided by the Work cover (the Insurer) and not the employer. Workers compensation offers benefits to both the employer and the employee. It protects the employer as they do not have to pay wages or expenses while a worker is absent from work and it offers financial support to employees to enable them to focus on getting better without worrying about treatment expenses. 

The benefits of workers’ compensation to employees are:

• Cover some of the employee’s wages while recovering away from work.
• Cover medical and hospital expenses, as well as other rehabilitation assistance.
• Travel expenses.
• Pay a lump sum payment if an employee receives a permanent work injury.
• Pay funeral expenses, periodic payments for dependents and lump sum compensation to support the family if the employee is killed at work. 

Workers compensation is paid to an employee through the following:

• By the insurer.
• From the insurer through the employer.
• By the workers compensation regulator.

Payment received by the workers through workers compensation is taxable at the standard tax rates and is subject to PAYG withholding.

As the employee is not working, work-related deductions don’t generally apply to workers receiving workers compensation for income tax purposes. A taxpayer receiving workers compensation payments must present a medical certificate to the paying authority as a condition of receiving such payments and is entitled to a tax deduction for the incurred travel expenses. The cent per kilometer method is used to calculate kilometer travel to and from the doctor’s surgery or based on out-of-pocket expenses incurred as fares by bus, train, and the like. However, travel for medical appointments is considered private and non-deductible.

But what about the superannuation guarantee contribution? Who will pay for it?

The Work Cover (the insurer) is not obliged to pay the employee’s superannuation for the first 52 weeks he or she remains unable to work due to injury or illness. But if the employee is still unable to return to work for more than 52 weeks, the insurer will then be obliged to pay the employee super contributions from this point.

The insurer will base the superannuation payments on your gross weekly payments. The insurer will pay the superannuation contributions directly to the employee’s nominated superannuation fund, in addition to the weekly payments.

However, it is important to note that the release of any lump sum from your superannuation balance is likely to have tax implications. Be sure to contact your tax accountant for advice.

For more information regarding this topic, please contact us.

Yan (Jenny) Qi CA

Founder of Progress CA Pty Ltd

Tel. no. 0403 050 779

Email: info@progressca.com.au

Website: www.progressca.com.au