Why unreported cash is not king in personal injuries claims

Despite the prevalence of digital payment systems, payments in cash remain a feature in Australian society and there are elements of society that consider the right to make and receive payments in cash essential. 

While the receipt of cash payments is not in of itself illegal, it is often associated with undeclared earnings and tax evasion. The law does not look favourably on persons evading taxes or underreporting their earnings in an effort to obtain WorkCover or Centrelink benefits that they would otherwise not be entitled to. 

One should be mindful of the impact undeclared earnings and tax evasion may have on a claim for compensation, in addition to risk of criminal prosecution for failing to declare earnings to entities such as WorkCover Queensland, Centrelink and the Australian Taxation Office.

Why are undeclared earnings relevant to a claim for damages?

Persons claiming damages arising from personal injury have a duty to disclose information relevant to their claim. This includes cash payments and income not declared to relevant government organisations.

Very often, when a person claims compensation for their injuries, the largest head of damages is the loss of their capacity to earn an income. The evidence courts will consider in determining a loss of income earning capacity is not limited to simple review of a person’s income as it has been declared to the Australian Taxation Office. It has been confirmed in cases such as AAI Ltd v Marinkovic [2017] QCA 54 and Paetzold v At Beach Court Holiday Villas Pty Ltd [2024] QDC 35 that, granted a court can be confident about the level of undisclosed income, the assessment of damages should be done on the basis of total income loss and not just that disclosed to the Australian Taxation Office.

Consequences for failing to disclose undeclared earnings

Failing to disclose income can or will prejudice the party compensation is being claimed against.  The consequences for failing to disclose could include:-

• a claim being dismissed;
• if not dismissed, serious concerns as to the credibility of a claimant being raised, resulting a significant reduction in damages that may otherwise be awarded for economic loss; 
• if not dismissed, serious concerns as to the credibility of a claimant being raised generally, resulting in courts questioning the claimant’s account of other matters, such as the severity of their symptoms; and 
• in a worst-case scenario, if a court believes a person has committed an offence by failing to disclose taxable income or fraudulently claiming benefits when they should have known that their unreported income would have prevented them from accessing said benefits, the court will bring such matters to the attention of the relevant authorities to investigate and potentially prosecute. 

Honest compliance with taxation laws and honest reporting of earnings to WorkCover Queensland, Centrelink and the Australian Taxation Office is a reflection of a claimant’s credibility as a witness. Conversely, non-compliance with taxation laws and dishonest reporting of earnings to the same entities will have an adverse impact on the claimant’s credibility and may suggest that a claimant’s personal accounts are untrustworthy or prone to exaggeration, if not outright false. 

A referral to the authorities for investigation and prosecution may still occur even if the court awards compensation for injuries sustained. 

Final thoughts 

Even if a person is not injured and not claiming compensation, the writer can and must recommend people honestly report their income to government entities, including income from cash payments. 

So long as cash payments are properly and honestly reported to relevant government entities, there is nothing wrong with earning with being paid in cash.  However, if such income is not properly reported, a person’s claim for personal injuries can be seriously and negatively impacted.  Notwithstanding this, a person exposes themselves to criminal prosecution. 

Before embarking on any claim for compensation, injured persons should review their income history and ensure that this history is properly reported to the relevant authorities, taxes are correctly paid and entitlements to benefits are paid with proper regard to all sources of income. 

In the eyes of the law, cash, if not reported, is not king.