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Overview of Compensation Offsetting

Document
Last amended 
5 December 2014

Last Amended: 5/12/2014

 

What is compensation offsetting?

The general principle behind compensation offsetting is that a person should not be compensated twice for the same incapacity or in the case of war widow's/widower's pension twice for a veteran's death. Nor should a person receive more compensation than an equivalent person would receive for the injury or disease if they were only eligible for compensation from the one source.

What is an award of compensation or damages?

Compensation includes:    

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Compensation Offsetting and Award of Compensation or Damages

Section 9.10.2

 

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  • any payment that is in the nature of compensation,
  • any damages recoverable at law from a government or any other person (whether within or outside of Australia), in respect of injury to, or the death of, a person, or
  • any amount paid under a compromise or settlement of a claim for damages.

 

Payments under the Safety, Rehabilitation and Compensation Act 1988 (SRCA), which is administered by DVA for Defence claims for service prior to 1 July 2004, are considered compensation.    

 

Most payments under the SRCA that attract compensation offsetting under the VEA are due to the veteran or dependant having dual eligibility to claim the injury or death under both Acts.

This dual eligibility dates back to 1972, when ADF members on peacetime service became eligible to claim under two separate compensation schemes (the VEA and the SRCA antecedent Act). At the same time, the Compensation (Commonwealth Government Employees) Act 1971 continued to cover peacetime service, hence the dual entitlement.

Defence Force members were not entitled to receive benefits under both Acts for the same injury or illness. They could, however, elect to receive the benefit most beneficial to them. As noted earlier, a key principle of offsetting is that dual eligibility should not result in claimants receiving benefits greater in value than the more generous of the benefits available under either the SRCA or the VEA individually for the same incapacity.

Defence Abuse Reparation Scheme payments are not compensation

Reparation Payments made by the Defence Abuse Response Taskforce (DART) under the Defence Abuse Reparation Scheme are not compensation payments and therefore will not affect DVA compensation payments through compensation offsetting. Further information about the Defence Abuse Reparation Scheme is provided in Chapter 9.12. 

Superannuation fund Total and Permanent Disability (TPD) payments are not compensation

Total and Permanent Disability payments derived from their Superannuation fund are not defined as ‘compensation’ under the VEA and will therefore not have an offsetting impact on Special Rate disability pensions under the VEA.

This is because these payments are derived from contributions the client makes to their Superannuation fund across their working life. It is a payment more in the nature of an insurance payout rather than “compensation” attributable to an incapacity.

 

VEA payments affected by compensation offsetting

Compensation offsetting applies to the following benefits paid under Part II VEA and Part IV VEA:

How does compensation or damages affect disability pension?

The amount of disability pension payable in a fortnight must be reduced (or offset) to take account of any other periodic (for example, weekly or fortnightly) compensation payments that are made in the same period for the same incapacity, or offset by a fortnightly equivalent amount, when the compensation has been received as a lump sum. The fortnightly equivalent is calculated using formulas and instructions from the Australian Government Actuary and is then offset against the pension for life, or as long as the person receives that pension.

If a veteran has a number of disabilities accepted under the VEA, but the other compensation is only for some of these, DVA will make a separate pension assessment just for those disabilities affected.  This is known as a notional assessment. In most cases, offsetting only affects that part of a disability pension paid for the same incapacity for which the other compensation is paid. The amount of the reduction or offset is the lesser amount of the assessed disability or the other compensation paid for the same incapacity.    

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Compensation Offsetting and Disability Pension

Section 9.10.3

 

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Additionally, all claims and applications for increase to an existing rate of pension that are lodged on or after 1 July 2004 and result in the payment of an earnings-related pension or allowance (special rate, temporary special rate, intermediate rate or loss of earnings allowance) will be reduced or offset by any lump sum payment received for permanent impairment under the SRCA. This applies to lump sum compensation for any incapacity, irrespective of whether the incapacity is included in the pension assessment. The authority for this is contained in section 25A VEA.

The operation of Chapter 19 of GARP V

Chapter 19 of GARP requires a delegate to 'apportion off' any relative contribution of the incapacity that is not entirely due to the effects of a person's accepted condition/s. This action is performed by a delegate during the initial claim process or if an application for increase is lodged. Essentially, if a veteran is suffering the same incapacity from more than one condition and a portion of that incapacity is the result of a non-accepted condition, the removal of that partially-contributing impairment also removes the requirement to offset any compensation that may have been received for that condition.

Compensation offsetting and war widow's/widower's pension, orphan's pension and ISS

The war widow's/widower's pension and orphan's pension paid under the VEA are compensation for a veteran's death. If a person receives any award of compensation or damages from another source for the veteran's death (either in Australia or overseas) there must be a corresponding reduction or offset to the amount of pension paid under the VEA to preclude double compensation.

This compensation can include compensation for the death of a veteran received under section 17 of the SRCA. Any compensation payment offset against a war widow's/widower's pension is not counted again for offsetting an income support supplement(ISS).     

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Compensation Offsetting and War Widow's/Widower's Pension or Orphan's Pension

Section 9.10.4

 

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The general principle of compensation offsetting holds that a person should not be compensated twice for the same incapacity.

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.

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.

 

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 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.

According to subsection 5D(1), an injury means any physical or mental injury (including the recurrence of a physical or mental injury) but does not include:

  • a disease, or
  • the aggravation of a physical or mental injury.

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.

 

 

A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.

Guide to the Assessment of Rates of Veterans' Pensions.

ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.

 

 

ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.