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Compensation Payments Excluded from Part IIIC Compensation Recovery Provisions

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Last amended: 17 September 2013

Compensation payments directly impacting on Part II or IV pensions or MRCA payments

    

Any portion of a lump sum or periodic compensation payment that has been taken into account to limit a person's disability pension, war widow(er)s pension, or Military Rehabilitation and Compensation Act 2004 (MRCA) payment, is excluded from the Part IIIC compensation recovery provisions. Any portion of the compensation payment that does not affect the rate of disability pension, war widow(er)s pension or MRCA payment will be assessed under Part IIIC, if the compensation payment is for economic loss.

If compensation affects a person's service pension or income support supplement [glossary:(:]ISS[glossary:):] under the Part IIIC compensation recovery rules, and the veteran subsequently applies and has the disability for which the compensation is paid accepted, the effect of the compensation payment under Part IIIC on the pension is adjusted. This may involve recalculating the lump sum preclusion period to account for the reduced compensation amount or adjusting the amount assessed as a periodic payment. Where a person receives a compensation payment and the offsetting of the disability pension, war widow(er)s pension or MRCA payment is less than the amount of compensation paid, then the excess of compensation paid is taken into account under Part IIIC.    

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Compensation Offsetting

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Compensation recipient contributions

    

Part IIIC does not apply to a compensation payment if:

  • the compensation recipient has made contributions towards the payment (for example by way of insurance premiums), and
  • the agreement under which the contributions are made does not provide that the amounts that would otherwise be payable under the agreement are to be reduced or are not payable because the recipient is eligible for or receives the [glossary:compensation affected pension:] [glossary:(:][glossary:CAP:][glossary:):], or
  • the agreement does provide for the amounts to be reduced but the compensation has been calculated without reference to that provision of the agreement.

In determining whether the compensation recipient has made contributions towards the payment, it is not necessary that the compensation recipient makes the payment, for example insurance premiums, directly to the insurer.  Where an employer-employee agreement (collectively or individually) provides, as part of an overall package of benefits, for the employer to make payments of income insurance or salary continuance premiums to the insurer on behalf of the employee, that can be accepted as representing a contribution by the employee.

Payments in respect of criminal injury

    

Part IIIC does not apply to compensation payments made for a personal injury or disease or condition suffered as a result of the commission of an offence.

Compensation paid on death

The compensation recovery provisions only apply to living persons, not estates. Compensation recovery notices can only be served on living persons, or insurers or compensation payers who are liable to pay people, not estates. Therefore while a recovery notice cannot be issued after death, a recovery notice issued prior to the death of the compensation recipient is valid.

In some jurisdictions, compensation payments are paid to the surviving spouse of a deceased worker by the workers' compensation authority (for example the Dust Diseases Board). If the compensation payment is made for non-economic loss, the payment should be assessed as ordinary income. That is, they are not assessed under Part IIIC. If they are made wholly or partly for economic loss the compensation recovery provisions apply.

Compensation paid under the Defence Act 1903

Payments of Severe Injury Adjustment (SIA) or Additional Death Benefit (ADB) under the Defence Act 1903 are excluded from the compensation recovery provisions, as they do not include payments which are wholly or partly in respect of lost earnings or lost capacity to earn.

Compensation as a result of Australian Defence Force Reserve activity

    

Compensation as a result of Australian Defence Force activity (other than compensation on respect of continuous full-time service) is exempt from the compensation recovery provisions.  This is irrespective of whether or not the compensation recipient, or their partner, was in receipt of a CAP at the time of the compensable event.  It is also exempt income for the purposes of the ordinary income test.

The available discretion to treat the whole or part of a compensation payment as not having made for the purposes of the compensation recovery provisions should be exercised, where compensation is paid in respect of ADF Reserve activity other than for continuous full-time service.

However, any compensation payments made in respect of an inability to attend the usual (civilian) workplace (including any such payments paid by the Defence Force) are not exempt and should be treated as compensation.

Assessment under income and assets tests

    

Any compensation payments that are not assessable under the recovery provisions will be assessed as ordinary income, unless specifically exempted under subsection 5H(8).


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.