Partner Moray & Agnew
Having practised in insurance law for almost 20 years, Daniel has extensive expertise in workers’ compensation and common law actions. He has particular experience appearing as Counsel at WorkCover WA and in the District Court of Western Australia. Daniel is focused on representing the best interests of clients at hearing or by negotiating a commercial outcome. Daniel has worked with LGIS and local government members for over a decade and understands the issues that matter to the sector.
This ruling has wide ranging ramifications for LGIS members and the Scheme moving forward.
In Western Australia, informal settlement negotiations are commonly an option to explore a resolution to workers’ compensation claims.
A settlement between an employer and a worker may be considered the best outcome to conclude a claim, being in the interest of all parties.
In such circumstances, the parties may enter into a WorkCover settlement agreement which is registered by the Director of WorkCover.
Section 149 of the Workers Compensation and Injury Management Act 2023 (‘the Act’) operates to commute to a lump sum the liability of the employer to pay compensation to a worker in respect of an injury. A settlement agreement permanently discharges the liability of the employer.
In a settlement agreement, a component for income compensation payments may be included as well as allowances for medical, rehabilitation and miscellaneous expenses.
Congratulations to the Shire of Yilgarn who were award their Tier 3 Silver diligence in Safety Award. James Sheridan, CEO LGIS and Christ Gilmour, Risk Specialist – Regional visited the
Shire on Tuesday 26 February to meet the Yilgarn team and present the award.
In February this year the Australian Tax Office (ATO) made a private ruling on the following question: ‘Is the income compensation component of the redemption settlement payable under Workers Compensation and Injury Management Act 2023 (WA) included in your assessable income under section 6-5 of the Income Tax Assessment Act 1997 (Cth)?’ The ATO’s very short answer was ‘Yes’.
It’s a question very few people want to ask but given the current cyber risk landscape shows no signs of slowing, it’s likely an inevitable question for organisations, including local governments.
On 13 February 2025, in response to an application brought by a WA law firm which represents workers, the ATO provided a private ruling addressing the tax implications of entering into a settlement agreement registered under Section 149 of the Act.
According to the private ruling, the income compensation component of a settlement agreement is to be included in a worker’s assessable income under the Income Compensation Assessment Act 1997.
The income compensation included in settlement agreements has previously been negotiated on net (rather than gross) terms since, as we understand, workers were not usually advised to declare this allowance in their assessable income. However, in light of the recent private ruling, it will now be necessary to negotiate income compensation on a gross basis.
We anticipate that the private ruling will have a financial impact on employers with the quantum of settlements increasing, given the additional tax component to be reflected in settlement agreements.
For example, when currently negotiating on net, the tax rate utilised is between 18%-25%. The new ruling means that a current settlement of $50K would now be $62.5K or slightly higher.
The private ruling is of particular relevance to settlement agreements under Section 149 of the Act. The resolution of District Court actions should not be affected e.g. by consent to judgment which can only be entered into if a worker is entitled to access common law damages.
The recent WA Local Government Convention was an excellent opportunity to chat with members and talk about the issues that matter to you. LGIS also appreciated the invitation from WALGA to provide members with an update at their AGM on our 2023/24 results and achievements. For more information, our end of financial year reports, A Year in Review and Annual Financial Report, are now available on the LGIS website or you can read the article on page 18.
Even the smallest or most remote local government in Western Australia is connected to the global commercial market through their protection. Over the next few editions we’ll look at the
factors of concern and influence for each portfolio for LGIS, this edition we’re looking at LGIS Liability and Property protection.
Working from home and hybrid working is now common practice for many local governments. It offers plenty of benefits to individuals and employer alike. It can provide meaningful flexibility for employees to juggle multiple demands and is now expected by many recruits.
LGIS is the unifying name for the dedicated suite of risk financing and management services for WA local governments, established by the WA Local Government Association in conjunction with JLT Public Sector (part of the Marsh group of companies). LGIS is managed by JLT Public Sector (ABN 69 009 098 864 AFS Licence 226827).
Risk Matters, via this website, is designed to keep members, their staff and elected members informed on topical risk management and insurance issues and LGIS programs and services.
