For someone whose injury has changed what they can earn, this is where the real value of a claim usually lies. A serious car accident does not just cost you time off work now. It can reduce what you are able to earn for the rest of your working life, and lump sum damages for economic loss are how the law puts a value on that. Of all the parts of a CTP claim, this is the one where the amount is most often understated, and where careful preparation makes the biggest difference.
Economic loss is also widely misunderstood. People assume it means the wages they have already missed, when in truth the larger and more important part is usually about the future, your reduced capacity to earn over the years ahead. Understanding how it is calculated, and where insurers tend to undervalue it, matters a great deal.
This guide explains what damages for economic loss are, who can claim them, how past and future loss are worked out, and the adjustments that shape the final figure. Please treat it as general information rather than advice about your own claim, and you should seek legal advice about your particular situation before making decisions about it.
What are damages for economic loss?
Damages for economic loss are the part of a common law claim that compensates you for the financial cost of a serious injury, primarily your loss of earnings and the superannuation attached to them. They fall into two parts, your past economic loss, meaning what you have already lost from the accident until now, and your future economic loss, meaning what you will lose going forward.
It is important to see how this differs from the other things a CTP claim can provide. Your treatment and care are covered separately, through statutory benefits, and are not part of an economic loss award. Pain and suffering is a different head of damages again, with its own separate threshold. Economic loss is purely about money, what the injury has taken and will take from your ability to earn a living.
These damages are governed by Part 4 of the Motor Accident Injuries Act 2017 (NSW), the scheme regulated by the State Insurance Regulatory Authority, known as SIRA, which sets out both what can be claimed and the limits that apply.
Who can claim damages for economic loss?
To claim damages for economic loss, two things generally need to be true. Your injuries must be more than threshold injuries, once called minor injuries, and another party must have been at fault for the accident.
There is an important point here that often surprises people. Unlike pain and suffering compensation, damages for economic loss do not require you to exceed 10 per cent whole person impairment. That 10 per cent threshold applies only to non-economic loss. So even if your permanent impairment is assessed at 10 per cent or below, you may still be able to claim for your past and future loss of earnings, provided your injuries are more than threshold injuries and someone else was at fault. The door to economic loss stays open in situations where pain and suffering is closed.
Past loss of earnings and future loss of earning capacity
The two components of an economic loss claim work quite differently, and it helps to see them side by side.
| Past economic loss | Future economic loss | |
|---|---|---|
| What it covers | Earnings you have already lost from the accident until now | The earning capacity you lose going forward, through to retirement |
| How it is worked out | Largely a matter of record, what you would have earned, less what you did earn | Based on your most likely future circumstances but for the injury, then adjusted |
| Key features | Statutory benefits you have already received are accounted for | Discounted to present value and adjusted for life’s contingencies, subject to a cap |
Past economic loss is usually the more straightforward of the two, because it looks backwards at a period that has already happened. It is the difference between what you would have earned since the accident and what you actually managed to earn.
Future economic loss is where the real complexity, and usually the real value, lies. It is not simply about whether you can work at all, but about your earning capacity, and how the injury has diminished it. Even someone who has returned to work can have a future economic loss claim, if they are now more vulnerable in the job market, cannot work the hours or overtime they used to, cannot progress as they would have, or may need to stop earlier than planned.
How future economic loss is calculated
Because future economic loss looks ahead over many years, the law sets out a specific way of working it out, and each step tends to reduce the headline figure.
First, you have to establish your most likely future circumstances but for the injury. The Act requires you to satisfy the court or the Commission about the assumptions your claim is based on, for example what you would most likely have earned, and for how long, had the accident never happened. This is the foundation of the whole calculation, which is why evidence of your career path, your earnings and your prospects matters so much.
From there, the projected loss is adjusted downwards in two important ways. It is reduced for the general contingencies of life, sometimes called vicissitudes, to reflect the possibility that you might not have worked continuously anyway, through illness, unemployment or other life events. And it is discounted to present value, using a prescribed discount rate of 5 per cent, because you are receiving as a single lump sum today money that you would otherwise have earned gradually over many years.
There is also a cap. The earnings figure that can be used in the calculation is limited to a maximum, set at a multiple of average weekly earnings and indexed each year, so a very high income earner cannot recover their full loss above that ceiling. The current figure is published by SIRA.
Where a precise calculation is not possible, for example where your loss is real but hard to quantify exactly, the loss can sometimes be awarded as a lump sum buffer rather than a week by week calculation.
Superannuation and the value of lost capacity
Your loss of superannuation is part of an economic loss claim as well. Because superannuation is paid as a percentage of earnings, the loss of the super you would have accumulated on your lost earnings is generally recoverable, at the minimum rate required by law. Over a long working life, this can add a meaningful amount to a claim.
The broader point is that economic loss is about lost capacity, not just lost wages. That distinction is easy to miss and easy for an insurer to exploit, because it means the question is not only what you are earning today, but what you have lost the ability to earn across your whole working future.
What comes off your award
A few things reduce the final amount you receive, and it helps to know them in advance.
Statutory benefits you have already received, such as weekly payments, are generally accounted for, so you are not compensated twice for the same period of lost income. If you were partly at fault, your damages are reduced for contributory negligence by a percentage reflecting your share of responsibility. And the adjustments described above, the contingencies reduction, the discount rate and the earnings cap, all shape the figure before it reaches you.
None of these should be a surprise at the end of a claim. Understanding them from the start allows a realistic view of what an economic loss claim is likely to be worth, which is far better than an inflated expectation followed by disappointment.
How Stephen Young Lawyers can help
Economic loss is the part of a claim where good representation most clearly changes the outcome, because so much rests on assumptions that are open to argument. The difference between an insurer assuming you can earn close to your old income and a properly evidenced picture of your real, reduced capacity can be very large indeed.
An experienced personal injury lawyer builds the evidence for your most likely future circumstances but for the injury, obtains the medical and vocational material needed to establish your true earning capacity, resists optimistic assumptions that understate your loss, and makes sure superannuation and every recoverable component is included. Where your injuries are serious, this is usually where the real value of your claim is decided.
If you want to understand the wider picture, we have guides on how CTP compensation payouts are calculated, on statutory benefits versus common law damages, and on pain and suffering compensation and the 10 per cent threshold, which is the separate head of damages mentioned above. You can read about your broader options on our motor vehicle accident claims page. As an Accredited Specialist personal injury firm based in Sydney CBD, with a multilingual team and a No Win No Fee approach for eligible matters, we can review your situation and tell you where you stand.
No lawyer can promise you a particular outcome, and every claim turns on its own facts and evidence. What can be said is that future loss of earnings is where serious claims are most often undervalued, and that it deserves careful attention rather than acceptance of the first figure put to you.
Speak with an experienced motor accident lawyer today
If a serious injury from a motor accident in New South Wales has affected what you can earn, now or in the future, it is worth having your economic loss assessed properly before you accept any figure.
Contact Stephen Young Lawyers today for a free, no obligation consultation. Call us or get in touch through our website to speak with an experienced personal injury lawyer about your injuries and your options.