The ACT Government will spend $3.4 million next financial year implementing a new compulsory third party (CTP) insurance scheme.

The sum, including $1.15 million in expenses and $2.25 million of associated capital, will pay for a new IT system, implementation of administrative arrangements and development of new legislation. Expense costs and capital in the following financial year are expected to drop to $677,000 and $692,000 respectively.

Ongoing costs will be met by the CTP levy, according to budget papers.

Under the scheme, defined benefits will be available to everyone injured in a car accident, and common law benefits will be available to anyone injured through negligence.