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TAXATION LAWS AMENDMENT (STRUCTURED SETTLEMENTS) BILL 2002—SENATE'S AMENDMENTS

The order of the day having been read for the consideration of the amendments made by the Senate—

On the motion of Mr Slipper (Parliamentary Secretary to the Minister for Finance and Administration), by leave, amendments (1) to (8), (10) to (12) and (14) to (64) were agreed to, after debate.

On the motion of Mr Slipper, by leave, amendments (9) and (13) were disagreed to, after debate.


Mr Slipper presented reasons, which were circulated, and are as follows:

Reasons of the House of Representatives for disagreeing to the amendments of the Senate

Senate Amendment 9

This amendment would allow an injured person or his or her legal personal representative to purchase a tax-free annuity under the terms of a settlement.

The bill was originally drafted on the principle that the exemption should be restricted to the situation where the tax-free annuity was purchased by defendant or the defendant's insurer. The bill is intended to encourage the take up of compensation in the form or periodic payments rather than lump sums. Periodic payments give the injured person a more secure income over the longer term and, more importantly in this context, allows the compensation to be more closely aligned to an injured person's needs. By better matching compensation with needs, the Bill may have some impact on reducing claims costs for insurers.

This benefit could be lost if the injured person or his or her representative took the compensation in the form of a lump sum. Although the requirement for an agreement between the injured person and the defendant is not being removed, there would be no guarantee that the lump sum settled would not effectively differ from the lump sum settlements currently paid.

If an injured person could accept a lump sum, the injured person might not be as rigorous in financial planning before accepting the settlement. The injured person or his or her representatives would then have to ensure that he or she got the most appropriate structured arrangement in return for the lump sum that was received.

In addition, there would need to be extra rules about the time in which an annuity must be purchased and rules to ensure that an annuity is actually purchased and the money not dissipated before the annuity can be purchased.

The requirement that only the defendant or their insurer can purchase the annuity ensures that more appropriate settlements can be reached with the defendant that take into account longer term considerations.

Requiring the defendant or insurer to make the final purchase ensures that only funds received in compensation are used to purchase the structured settlement, rather than other funds. It also ensures that the annuity is used to meet expenses arising from the injuries rather than for a different purpose.

It is also not accepted that a defendant or defendant's insurer would not necessarily be able to purchase annuities at as competitive a rate as an injured person or his or her representative.

The House of Representatives therefore does not accept this amendment.

Senate Amendment 13

This amendment would require injured persons to obtain independent financial advice before entering into a structured settlement.

However there is no definition of an independent financial adviser in this context and so the provision would be difficult to enforce. The nature of the advice to be sought is also poorly defined. As it stands, each case would require a decision about whether the advice was independent and was "financial advice", before adherence to the terms of the law could be determined.

Furthermore, it is not clear what the consequence is if the injured person fails to obtain "independent financial advice". Because of the position of the amendment in the Bill, it is not clear whether the intention is that this should mean that the exemption is denied.

The House of Representatives does not accept this amendment.

On the motion of Mr Slipper, the reasons were adopted.