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4 Lump Sum - Offsetting
When the other compensation is paid as a lump sum, the VEA requires a fortnightly pension equivalent to be calculated using a formula determined by the Australian Government Actuary (AGA), and a dollar for dollar reduction is then made to the fortnightly pension payment. Information concerning the calculation of the fortnightly equivalent under the AGA formula is at Chapter 8 of this manual.
Step 1 - Identify the dollar amount of disability pension paid in respect of the incapacity for which the other compensation is paid.
A notional assessment may be required if the rate of disability pension includes incapacity from conditions not included in the other compensation - refer to page 15 for notional assessment steps. (go back)
Step 2 - Calculate the fortnightly equivalent of the lump sum other compensation paid, using the AGA instructions and tables.
Exclude any amount that represents expenses incurred in medical or hospital treatment and Severe Injury Adjustment and Additional Death Benefit paid under the Defence Act. Disregard any amount for specified "party-party" legal costs incurred in connection with the claim for compensation/damages. (go back)
Step 3 - Compare the dollar amounts from Step 1 and Step 2; the lesser is the amount by which the disability pension is offset.
Step 4 - The offset amount is manually entered into the PIPS payment system, Disability Pension Screen/PTIV. This initial offset amount is indexed by CPI at the same time as disability pension is increased.
Step 1 - Veteran A receives 70% ($284.48) disability pension per fortnight for incapacity for this lower back condition, only A/D.
Step 2 - Veteran A is 46 years old next birthday and he has received a lump sum compensation payment of $31,250 for his lower back condition. The fortnightly equivalent is calculated by the AGA formula:
31,250 x 18.351 = 57.35.
Step 3 - Disability pension is offset by the fortnightly equivalent, as this is the lesser of the two amounts above.
Step 4 - The amount of $57.35 is manually entered into the PIPS payment system, Disability Pension Screen/PTIV indexed field.
Veterans' Entitlements Act 1986.