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20.28.4 Redemption Taxation Pitfall for Clients
Although payments under Section 30 are mandatory, it is strongly recommended that Section 30 redemptions be paid only after prior consultation with individuals concerned – see suggested paragraph below. It is recommended that the following paragraphs be used when advising claimants about their entitlement to lump sum redemptions and the need for each individual to seek tax advice:
It is the aim of this office to award the above lump sum redemption payment to you promptly. Since receipt by you of the lump sum is likely to have taxation implications, we suggest that you consult a taxation expert or your local Australian Taxation Office concerning your likely taxation liability as a consequence of receiving this payment.
Once you have done so and are confident that you understand the taxation implications of proceeding with your redemption entitlement, if you wish to receive the above payment, please notify this office as soon as possible so that arrangements can be made for the lump sum award to be deposited into a bank account nominated by you.
You should note that the SRCA makes no provision for reimbursement of any costs associated with consulting a tax expert for these purposes. In addition, please note that because redemption payments are based on the amount of weekly compensation payable at the date the lump sum redemption is determined, any delays in receiving your response to this letter may affect the amount of your lump sum redemption entitlement under the SRCA. You early response to the above is therefore advisable.
For Section 30 redemptions, include the following paragraph:
Under Section 30 of the SRCA, payment of lump sum redemption entitlements is mandatory. However, as part of our service to our clients, prior to awarding the redemption lump sum we would like to ensure that you have an adequate opportunity to obtain an appraisal of the likely taxation implications of receiving such a payment. We therefore await your response to this letter.