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9.10.2 Compensation Offsetting and Award of Compensation or Damages

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Last Amended: 15 March 2012

Who is affected by compensation offsetting under the VEA?

Any person who is seeking or who receives a pension payable under Part II or Part IV of the Veterans' Entitlements Act 1986 (VEA) who:

  • has received a benefit from another source for the same incapacity (or death), or
  • is eligible to claim a benefit from another source for the same incapacity (or death), or
  • has received a lump sum compensation payment under the Safety, Rehabilitation and Compensation Act 1988 (SRCA) and is assessed as eligible for any of the following earnings-related payments
What does compensation or damages not include?

Compensation or damages does not include:

  • any expenses incurred in medical or hospital treatment,
  • payments under an insurance policy owned by a veteran or dependant (for example, life insurance, travel insurance claims, loss of income protection or salary continuance insurance),
  • a Severe Injury Adjustment or Additional Death Benefit which may be paid under the Defence Act 1903,
  • legal expenses specified by a Court as having been incurred in obtaining compensation from another party, or
  • superannuation payments, including those arising through invalidity as a result of a compensable event. Superannuation benefits are based on a person's equity in a superannuation fund and length of contributory service, rather than being related to the losses arising though a compensable event. These characteristics mean that they are not payments 'in the nature of compensation'.

Note:  payments received under an insurance policy, such as loss of income protection or salary continuance payments, are excluded as they are regarded as representing the return to the insured of their own funds, under a private insurance arrangement, rather than payments made through a compensation scheme.  As such, they do not satisfy the test of being a payment 'in the nature of compensation'.  There is no requirement (as there is in compensation recovery cases) to find that the recipient of the payment has made a contribution to the payment.

Lump sum compensation payments

Where the other compensation is paid as a lump sum amount, the VEA requires that a fortnightly equivalent amount be calculated and a resulting reduction applied to a person's fortnightly rate of pension.  A fortnightly equivalent is intended to represent a fortnightly return that a person could reasonably expect to receive for the rest of their life by investing that lump sum in a pension scheme.

The specific formula and life tables that are used to calculate the fortnightly equivalent are provided by the Australian Government Actuary (AGA).  The AGA apply the same principles that underpin lifetime annuities.  These products are paid for the duration of a person's life in exchange for an initial up front lump sum contribution.  The return from an annuity is based on the rate of interest to be earned as well as the person's life expectancy.  As interest will be earned on an invested annuity, the total amount paid over a person's lifetime is expected to be more than the initial lump sum invested – hence the total amount offset against a veteran's or war widow's/widower's pension over their lifetime will more likely than not exceed the amount of lump sum compensation they received from the other source.  These features are designed to create an offset that is comparable to the expected benefits of the lump sum payment over a person's lifetime.  The fact of whether a person decides to invest the lump sum or not does not affect the Actuary assumptions and does not affect the offset applied.

Compensation offsetting affects the part of disability pension that is paid for the same incapacity for which other compensation is paid.  Therefore, the offset amount is either the amount calculated using the AGA's formula or the actual amount of the assessed disability pension for that incapacity – whichever is less.

The initial fortnightly equivalent amounts are subject to indexation and are adjusted in line with CPI. This adjustment occurs at the same time as disability and war widow's/widower's pension are increased.

Compensation offsetting applies where lump sum compensation has been paid to the following clients who also receive benefits paid under Part II VEA and Part IV VEA for the same incapacity or death:

Periodic compensation payments

If other compensation is paid on a regular basis (for example, weekly or fortnightly), the disability pension or war widow's/widower's pension is offset on a dollar for dollar basis by the amount of periodic payment paid in respect of the same incapacity or death. Periodic compensation payments may be received from a number of sources including Comcare, State Workers' Compensation Boards, private insurance companies, the Dust Diseases Board, overseas compensation or incapacity payments under the SRCA.

The effect overseas compensation has on payments under Part II & Part IV of the VEA

Compensation type payments made by a foreign country can also trigger an offset.  If a veteran receives an overseas compensation payment (either periodic or lump sum), these payments are considered compensation for the purpose of offsetting.  This situation is unique in that there is no requirement for the overseas compensation to be for the same incapacity for offsetting to occur.  Section 26 of the VEA states that compensation received from a foreign country can be for any incapacity, irrespective of whether the incapacity is included in the assessment of the disability pension for the offsetting provisions to apply.  An examples of an overseas compensation payment is the Empire Air Training Scheme.

Veterans that receive compensation from the British Government in recognition of their service related incapacities with the Royal Air Force (RAF) and are paid disability pension under the VEA, will be offset on a dollar for dollar basis.

Similarly, a person assessed as receiving an overseas payment that is similar in character to the Australian war widow/widower pension, for the death of the same veteran, has their war widow/widower pension offset on a dollar for dollar basis.  These cases are known as 'composite' cases.  To be similar in character to a war widow/widower pension, the overseas payment is required to represent compensation for the same death of the person's partner due to war-caused or war-related injury or disease arising from their service in connection with a war or warlike operation in which the Crown has been engaged.

Fortnightly payments redeemed under section 30 of the SRCA

There is a specific exception in the VEA for a lump sum payment that is made under the provision of section 30 in the SRCA. A lump sum under this section consists of redeemed fortnightly payments that otherwise would have ceased at Age Pension age. In such cases offsetting ceases when the veteran attains Age Pension age.*

*Note: The relevant section of the VEA (30C) refers to age 65, whereas section 30 of SRCA refers to Age Pension age. This apparent anomaly is currently under review.     

 

Obligation to notify

Veterans and [glossary:war widows/:]widowers [glossary:or other:] dependants who are informed that they are likely to receive an award, payment or settlement of a compensation claim should contact DVA to determine how this payment might affect their pension. A veteran or war widow/widower who receives a disability pension or war widow's/widower's pension or has any treatment entitlement must inform DVA within 21 days if compensation or damages is received.

Right of reconsideration and review

The offsetting provisions are “self-executing”, that is, they don't require a decision to be made by a DVA delegate.  Therefore, there is no decision made, other than the actual rate of pension, that can be reviewed.  This means there is no avenue of appeal to either the Veterans' Review Board [glossary:(:]VRB[glossary:):] or the Administrative Appeals Tribunal [glossary:(:]AAT[glossary:):] in respect of compensation offsetting.

A veteran may ask for a re-examination of any compensation offsetting matter by a senior DVA officer who will consider any additional information provided.

A compensation offset is an administrative decision for the purposes of the Administrative Decisions (Judicial Review) Act 1977 and can be appealed to the Federal Court under the provision of that Act.


 

 

According to subsection 5D(2), incapacity from a war or defence-caused disease or injury is a reference to the effects of that injury or disease, and not a reference to the injury or disease itself.

Loss of earnings allowance can be paid where a veteran or a member of the forces, member of a peacekeeping force (or Australian Mariner)is employed and has lost salary due to:

  • receiving treatment for a war or defence-caused disability (including waiting for the supply or repair of an artificial limb or other surgical aid),
  • using part or all of employer provided sick leave for a war or defence-caused disability, and now having no benefit to cover an absence for another illness, or
  • attending an appointment arranged by DVA for the investigation of a claim for disability pension.

 

 

A payment to make amends for loss or injury to a person or property, or as a recompense for some deprivation (such as compensation to the owner for compulsory acquisition of their property).

Damages is the economic value of something lost or withheld. For compensation purposes, damages is the sum awarded for any loss or injury that has been sustained.

For the purposes of Part VI of the VEA, a reference to a veteran is taken to be a reference to:

  • a veteran as defined in subsection 5C(1) of the VEA;
  • a member of the Forces as defined in subsection 68(1) of the VEA; or
  • a member of a Peacekeeping Force as defined in subsection 68(1) of the VEA.

For the purposes of Part VII of the VEA, according to subsection 5C(1), veteran means a person (including a deceased person):

  • who is taken to have rendered eligible war service, or
  • in respect of whom a pension is, or pensions are, payable under subsection 13(6) and
  • in Part III and Part VIIC of the VEA includes a person who is:

 

 

A dependant of a veteran (including a deceased veteran) is:

  • the partner;
  • non-illness separated spouse;
  • widow(er) (other than a widow(er) who marries or remarries); or
  • a child of the veteran.

A severe injury adjustment is payable to a person who has been assessed as having 80% or more whole person impairment under section 24 of the Safety Rehabilitation and Compensation Act 1988 (SRCA). Additionally, the person must have suffered an injury to the brain or spinal cord resulting in paraplegia, hemiplegia, quadriplegia, an organic brain syndrome, blindness or a condition of similar effect.

 

 

An additional death benefit is paid when a deceased employee is survived by a spouse or by one or more financially dependent children if compensation is payable under the Safety Rehabilitation and Compensation Act 1988 (SRCA).

 

 

Disability pension, for the purposes of service pension and income support supplement, means:

  • a pension paid for incapacity from war caused conditions, or peacetime, peacekeeping or hazardous service caused conditions (other than a war widow's or orphan's pension); or
  • temporary incapacity allowance; or
  • any other payment in respect of incapacity or death resulting from war or war-like operations in which the Crown has been engaged [usually paid by another Commonwealth country].

A form of pension that is paid to the partner of a veteran where the veteran has died as a result of war service or eligible Defence ServiceWar widow's/widower's pension is also paid to the partner of a veteran whose death was not war caused if the veteran was a ex-prisoner of war or if the veteran was receiving Extreme Disablement Adjustment Rate, Special Rate (T&PI) or a rate increased in respect of certain war-caused injury or disease.

 

A form of pension that is paid to a child of a veteran where the veteran has died as a result of war service or defence service.  The child may be the natural or adopted child of the veteran or any other child who was wholly or substantially dependent on the veteran.

 

 

An allowance paid in respect of an incapacity from a war caused injury or disease resulting in amputation or blindness, as described in the table in subsection 27(1).

Loss of earnings allowance can be paid where a veteran or a member of the forces, member of a peacekeeping force (or Australian Mariner)is employed and has lost salary due to:

  • receiving treatment for a war or defence-caused disability (including waiting for the supply or repair of an artificial limb or other surgical aid),
  • using part or all of employer provided sick leave for a war or defence-caused disability, and now having no benefit to cover an absence for another illness, or
  • attending an appointment arranged by DVA for the investigation of a claim for disability pension.

 

 

Under the Empire Air Training Scheme the British Government accepted liability for compensation for any veteran whose death or incapacity resulted from service while attached to the RAF. The Empire Air Training Scheme provides for the British Government to reimburse the Australian Government for compensation payments under the VEA.

Safety, Rehabilitation and Compensation Act 1988

Age Pension Age refers to pension age as defined under the Social Security Act 1991, that is, pension age for people other than veterans.

 

 

Age Pension Age refers to pension age as defined under the Social Security Act 1991, that is, pension age for people other than veterans.

 

 

A widower is a man who was:

  • the partner of a person immediately before the person died: or
  • legally married to a woman and living with her immediately before she died; or
  • legally married to a woman and living separetely and apart from her on a permanent basis immediately before she died.

A dependant of a veteran (including a deceased veteran) is:

  • the partner;
  • non-illness separated spouse;
  • widow(er) (other than a widow(er) who marries or remarries); or
  • a child of the veteran.

The Veterans' Review Board is an independent statutory authority that has the power to review decisions made by the Repatriation Commision for the disability pension, war widow's/widower's pension, orphan's pension and attendant allowance.

 

 

The Veterans' Review Board is an independent statutory authority that has the power to review decisions made by the Repatriation Commision for the disability pension, war widow's/widower's pension, orphan's pension and attendant allowance.

 

 

The Administrative Appeals Tribunal is an independent body established by the Administrative Appeals Tribunal Act 1975, which reviews certain administrative decisions of specified Departments and Government agencies. The Tribunal is headed by a judge of the Federal Court of Australia who may sit with other tribunal members who are either judges, lawyers or persons who may possess some experience relevant to the subject of the review.

Administrative Appeals Tribunal.