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9.11.1 Overview of Compensation Recovery

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Last Amended: 29 June 2005

Impact of compensation

The compensation recovery assessment rules may apply to payments of compensation if:

Different assessment rules apply to payments of compensation if:

  • the compensation is regarded as solely for non-economic loss, that is, there is no component for lost wages /salary (Part IIIB), or
  • the compensation is paid to a person who is not receiving a CAP. That is, the person has reached pension age and therefore Part IIIC rules do not apply (ordinary income).

The focus of this chapter is the Part IIIC rules.

Definition of compensation for Part IIIC

    

Section 5NB of the VEA defines, for the purposes of Part IIIC of the VEA, compensation as:

  • a payment of damages or compensation, or
  • a payment under a scheme of insurance, or
  • a payment in settlement of a claim for damages.

The compensation payment must be made wholly or partly in respect of lost earnings or lost capacity to earn for the Part IIIC compensation recovery rules to apply (sometimes this is referred to as compensation for economic loss).

Compensation can be in the form of:

  • lump-sum payment, or
  • periodic payments, and
  • includes payments made outside Australia.
Pensions affected by compensation recovery provisions

    

If a person is entitled to, or receives compensation made wholly or partly in respect of economic loss and has not reached pension age (or qualifying age in the case of income support supplement [glossary:(:]ISS[glossary:):]), then the following pensions payable to a person may be affected:

  • invalidity service pension,
  • partner service pension, and
  • income support supplement.

These pensions are described as compensation affected pensions [glossary:(:]CAP[glossary:).:]    

Lump sum compensation

    

If a person receives compensation made wholly or partly in respect of economic loss in the form of one or more lump sum payments then the person may not be able to receive their CAP for the lump sum preclusion period.    

Periodic compensation payments

    

If a person receives compensation made wholly or partly in respect of economic loss in the form of a series of periodic payments their CAP may be reduced for the period for which the payments are received. The CAP payable to the compensation recipient is reduced on a dollar for dollar basis by the periodic compensation payments.    


According to subsection 5NB(1) of the VEA a compensation affected pension means:

  •       an invalidity service pension payable to a person who has not reached pension age; or
  •       a partner service pension payable to a person who has not reached pension age; or
  •       an income support supplement payable to a person who has not reached qualifying age.

 

 

Currently, the pension age for a veteran is 60 years of age (VEA 5QA).

The pension age for a non-veteran is determined by the table below:

Date of birth (both dates inclusive)

Age Pension age

1 July 1952 to 31 December 1953

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

On or after 1 January 1957

67 years

 

Qualifying age is defined in section 5Q(1) of the VEA and is equivalent to the pension age for a veteran which is described in section 5QA VEA as:

  •       60 years for a male,
  •       for females subject to age equalisation (refer to the table in section 5QA VEA).

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.

 

 

According to subsection 5NB(1) of the VEA a compensation affected pension means:

  •       an invalidity service pension payable to a person who has not reached pension age; or
  •       a partner service pension payable to a person who has not reached pension age; or
  •       an income support supplement payable to a person who has not reached qualifying age.

 

 

According to subsection 5NB(1) of the VEA a compensation affected pension means:

  •       an invalidity service pension payable to a person who has not reached pension age; or
  •       a partner service pension payable to a person who has not reached pension age; or
  •       an income support supplement payable to a person who has not reached qualifying age.

 

 

The lump sum preclusion period is the amount of time that a person or their partner is ineligible to receive the pension after receiving compensation in the form of a lump sum. Refer to Subsections 59Q(3) to 59Q(8) of the VEA to determine the lump sum preclusion period