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Permanent Incapacity Workers Compensation

Life changing events can happen in an instant and our health can deteriorate to a degree that we are unable to ever return to work and produce an income. This reality can be quite daunting and have serious financial consequences. In many cases the reason we are unable to ever work again will result in some sort of financial compensation. Before this happens it is crucial that you receive advice to structure the payment in the most tax effective way. Otherwise what you receive (gross) and what you are left with (net) can be very different.

Case Study

In 2011 Elliot Watson Financial Planning was referred to a former Police Officer who had recently been diagnosed with Post Traumatic Stress Disorder (PTSD). The client had experienced and witnessed many terrible things while on the job and this eventually led to her breakdown. At the time she was seeing a psychologist once a week and was extremely fearful, agitated, concerned about losing what she had and fearful of being around lots of people, including trusting them.

The client required advice because she was about to be medically discharged from NSW Police and due to receive two large payouts (insurance and workers compensation) totalling just under $1 million. There were significant decisions to be made in relation to tax implications.

“I need assistance in regards to the payments of my lump sums due to tax implications. Further, I need superannuation/investment strategy type advice in regards to the best way to invest my money to provide for my future (and present!)”.

“At this stage I am very concerned about what I will do over the coming years and how I will survive. I want to make sure that this money I receive lasts now and for many decades”.


  • Capital preservation “This is all I have, what happens if I run out?”
  • Tax minimisation
  • Debt reduction “is it the right thing?”
  • Help, support, direction (Peace of mind)
  • Maintain my lifestyle

How Did Elliot Watson Financial Planning Help?

We worked with the client to support her in getting clear on her options. She was receiving little to nil support from the department made even more difficult when suffering from PTSD.

Our team supported the client. We took over all of the paperwork responsibilities (where possible) and did all the chasing up to make the process as smooth as we could for her.

Concurrently our adviser worked with the client to support her by making the decision in front of her, identify her goals and worked on a strategy that would maximise her position.

These included;

  • Strategies to maximise the insurance payments and minimise the taxation impact.
  • Reducing and paying out debt.
  • Guidance and support on investment strategies. Investing in a way which the client was comfortable and provided a return greater than the cash rate.
  • Establishment of two tax effective income streams.

Value of Advice

Our adviser’s technical financial skills and knowledge saved the client over $70,000 in the short term and close to $400,000 in the long term, with a possible combined saving of just under half a million dollars.

The client now enjoys two tax effective income streams with enough money to fund her living expenses. She has no debt and is comfortable with her investment strategy. If more money is required the payments can be increased to meet her needs including larger one- off payments.

Immediate Benefit

TOTAL PAYMENT (Gross) $971,110 $971,110
TAX PAYABLE ($36,000) ($106,087)
NET PAYMENT $935,110 $865,023
SAVING $70,087

Long Term Benefit

EXAMPLE using an investment with a long term rate of return of 5%.

NET INVESTED $935,110 $865,023
RETURN OF 5% $46,755 $43,251
ASSESSABLE INCOME $27,158 $43,251
TAX PAYABLE @ MTR ($1,702) ($5,603)
LESS TAX OFFSET (15%) $1,702 Nil
NET INCOME $46,755 $37,648
SAVING $9,107 p.a. ($391,601 over life expectancy – 85 years)

*Does not include Medicare levy.

Had the client not sought advice and invested her capital in cash (5% rate of return) then she would have not have benefited from the tax free component and the tax offset available under the pension strategy. This strategy may also provide some Centrelink relief by providing a deductible component.

Without contacting Elliot Watson Financial Planning the client would have been solely responsible for coordinating the payment from the NSW Police and devising investment strategies to advance her position which she did not have the financial skills to do. Acting without advice would have had a detrimental impact on the client’s PTSD and could have possibly triggered depression and prolonged her recovery. By contacting Elliot Watson Financial Planning the client was able to alleviate stress on her; delegate the difficult work involved; receive quality advice to advance her position and still feel in control of her future.

Client Review

“I can only offer praise and gratitude to the team at Elliot Watson Financial Planning. I was referred to them at a time when my life was in turmoil. My adviser helped me make important decisions and has enabled me to get on with my life with a secure outlook, both financially, and personally. I cannot thank them enough for everything they have done for me. They went above and beyond the call of duty. I would absolutely recommend Elliot Watson Financial Planning. Thank you for everything you have done for me.”

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