B05/1995 ASSESSMENT OF WORKERS COMPENSATION AND DAMAGES CLAIMS FOR INCOME SUPPORT RECIPIENTS BELOW PENSION AGE FROM 1/1/95. | Compensation and Support Reference Library, Departmental Instructions, 1995

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B05/1995 ASSESSMENT OF WORKERS COMPENSATION AND DAMAGES CLAIMS FOR INCOME SUPPORT RECIPIENTS BELOW PENSION AGE FROM 1/1/95.

Document

DATE OF ISSUE:  12 JANUARY 1995

ASSESSMENT OF WORKERS COMPENSATION AND DAMAGES CLAIMS FOR INCOME SUPPORT RECIPIENTS BELOW PENSION AGE FROM 1/1/95.

NOTE:  Policy information in this DI has now been superseded by material in the GOSP.  This DI should only be used as a reference in respect of procedural matters.  Refer to Compensation Recovery chapter of the GOSP for all policy information.

INDEX

Actioning of Cases, 13

Advice to a potential compensation payer or insurer,   6

Affected Pensioners,   3

Cancellation of Service Pension,13

Child Related Payments (CRP), 10

Compensation affected payments (CAP),   3

Contribution by Compensation Recipient14

Entitlement Treatment and Fringe Benefits, 11

Income Support Supplement and Standard Rate,   9

Legislation,   3

Lump Sum Preclusion Period,   5

Members of a Couple Examples,   8

Offset Clauses,14

Ordinary Income,   8

Periodic Payments,  4

Pharmaceutical Allowance, 11

Receipt of Compensation,   7

Recovery Calculations,   7

Reduction in Amount Payable, 13

Remote Area Allowance, 10

Rent Assistance, 10

Requirement to pursue Compensation Award, 11

Restoration of pension at Pension Age,   9

Reviews. 14


Background

As part of the 94/95 Budget, the Government announced a change to the treatment of compensation for service pension purposes.  These changes will bring the Department of Veterans' Affairs (DVA) in line with the Department of Social Security (DSS) and are due to be implemented 1 January 1995.  From 5 January 1995, the first effective pay-day following implementation, those pensioners receiving workers compensation, sickness benefits or accident insurance could be affected by these changes and may have their pension adjusted accordingly.

2.These types of compensation payments invariably include a component paid in respect of loss of earnings.  In the past many insurance companies, taking Government income support programs into account when calculating settlements and awards, have reduced their overall payments to offset the amount of Government income support payable.  This initiative will ensure that insurers will pay the maximum payments and benefits under their policies rather than have the tax-payer supplement income support to incapacitated persons.

3.It should be noted that compensatory payments made by DVA, such as disability and war widow/ers pensions are not affected by these changes.  They continue to be exempt under the Service Pension Income and Assets Tests.

4.Arrangements have been made to exclude any accident, sickness or compensation payment made in respect of an accepted Department of Defence (DOD) or DVA disability claim from the new rules for income support.  This recognises that serving members can have their disability pension reduced because of the DOD payment and therefore, it would be double counting to also reduce their service pension in respect of that same payment.  Where a DOD compensation payment includes an amount for economic loss which is not related to an accepted disability, that amount will be taken into account when determining the amount, if any, of income support payable.

Details

5.There are two major changes to the way compensation will be treated after 1/1/95:

  • periodic payments of compensation will reduce service pension by $1 for every $1 of compensation received; and

  • receipt of a lump sum payment of compensation will result in a preclusion period during which pension is not to be paid.

6.It should be noted that:

  • certain payments will be exempt from the provisions such as child related payments which includes rent assistance and remote area allowance where appropriate; and

  • assessment of compensation under these provisions, is dependent upon when the person becomes entitled to the compensation.

7.For the purposes of this proposal compensation will be defined as money paid to a client, usually as a result of:

  • worker-related injury or illness;

  • injuries received in a car accident; or

  • injuries received because of the negligence or fault of another person.

8.Compensation may be received in the form of periodic and/or lump sum payments.

Affected Pensioners

9.Only clients under pension age are to be affected, pension age being as defined in the VEA.  The rationale for excluding those persons above age pension age is that when such people receives a compensation payment settlement it does not usually include a component representing economic loss.  The following clients may be affected by the proposal:

  • Invalidity service pensioners granted after 1 May 1987;

  • Partner service pensioners granted after 1 May 1987;

  • Carer service pensioners granted after 1 January 1993;

  • Income Support Supplement recipients granted by DVA after 20 March 1995, including those who were previously receiving a compensation affected payment from DSS.

10.Existing clients will only be affected if they are:

  • in receipt of periodic payments of compensation at 1 January 1995; and/or,

  • they have a lump sum payment of compensation settled after 1 January 1995.

11.New grants after 1 January 1995 will be affected if they receive periodic payments of compensation or they commence receiving periodic payments of compensation on or after 1 January 1995 and/or they have a lump sum payment of compensation settled after

1 January 1995.

Major Policy Changes

Legislation

12.Part IIIC has been incorporated into the Veterans' Entitlement Act (VEA) 1986 to include the legislative provisions relating to assessment of compensation to persons below pension age.  Compensation is now defined in section 5NB of VEA as it no longer comes under the definition of ordinary income.  Compensation recovery definitions for Income Support Recipients are included in Section 13, Division 3 of the VEA.

Terminology

13.For the purpose of these provisions, those payments affected will be known as "compensation affected payments" (CAP).  A payment only becomes a "CAP" when the person is under pension age and meets the criteria referred to in paragraphs 9 and 10.

14.For the purpose of these provisions, a "CAP" exempts the following service pension payments where there are dependant children:  Dependant Child Add On, Guardian's Allowance, rent assistance and telephone allowance.  Where there are no dependant children service pension and allowances are fully assessable (Please refer to paragraph 57 onwards for more details).


15.For the purpose of these provisions, the phrase "the event that gave rise to a person's entitlement to compensation" means:

  • if the disease, injury or condition was caused by an accident - the day of the accident; or,

  • in any other case - the day the disease, injury or condition first became apparent.

16.For the purpose of these provisions, the term "recovery" means the action of recouping those payments which have been paid to a client during a lump sum preclusion period.

Periodic Payments / Direct Deduction

17.DVA will adopt the methodology currently used by DSS to determine the rate of service pension payable as a result of the direct deduction rule.

18.Periodic payments of compensation are recovered in the form of direct deductions.  The direct deduction provisions are applied to the assessed rate (this rate may be the maximum rate or a reduced rate).  Ordinary income and compensation income are not combined.  The income test and direct deduction principles work separately.  Therefore, under the direct deduction provisions, each $1 of a periodic payment of compensation reduces the assessed rate of pension by $1.

19.As with the rules currently applying to ordinary income, when assessing the amount of compensation to be assessed the Department will take into account the gross amount received, not the after tax instalment deduction figure or the net amount.

20.The following example shows how a direct deduction is calculated.  All the following details are hypothetical:

This example shows a service pensioner who is under pension age and is in receipt of a                CAP.  He/She receives $160.00 per fortnight compensation and prior to 1 January 1995               is receiving the maximum rate of service pension and Pharmaceutical Allowance which is               currently $326.80 per fortnight:

rate of service pension$326.80

less deduction$160.00

rate of service pension$166.80

Client's new rate of service pension is $166.80 per fortnight with effect from 5 January 1995, being the pay-date following the introduction of this initiative.

If the same person had other income of $200 per fortnight, in addition to their               compensation income, then the following additional step would be required:

  • calculate the assessed rate, allowing for the ordinary income free area of $90.00               per fortnight,

continued overleaf

maximum rate of service pension

and pharmaceutical allowance$326.80

deduct ordinary income$200.00

less ordinary income free area$  90.00

sub total$110.00

divided by 2$  55.00

leaving an interim assessable

amount of$271.80

less deduction for CAP of$160.00

rate of service pension$111.80

Lump Sum Preclusion Period

21.DVA will adopt the methodology currently used by DSS to determine a lump sum preclusion period.  (Note: Preclusion periods will only be calculated where the settlement of the lump sum payment occurs after 1 January 1995.)

22.A preclusion period is calculated when a compensation lump sum is paid to a client.  A lump sum preclusion period represents the period during which income support payments are not paid to the client.  The date a preclusion period commences is dependent upon a number of factors.  The new Division of the VEA includes examples of how these cases are to be assessed.

23.The preclusion period may commence before a person is granted pension.  In this case the client is advised of when the preclusion period is due to expire and they will then be able to lodge another claim to retest their eligibility.  If the client has dependent children then payment of service pension can still be made subject to the conditions outlined from paragraph 57 of this instruction.

24.A preclusion period may also be backdated.  In cases where the client was in receipt of pension during the preclusion period, recovery of payments occurs.  Recovery is further explained from paragraph 30 onwards.

25.There are three steps involved in calculating a preclusion period:

  • Firstly, the amount of the lump sum which represents economic loss must be determined.  In cases where the court states the amount of economic loss, that amount will be used.  In all other cases 50 % of the lump sum is assessed.

  • Secondly, the average "all persons" average weekly earnings (AWE) is obtained.  This figure is obtained from the Australian Bureau of Statistics.  (This is likely to be either incorporated into the GOSP or an ongoing instruction will be issued.)  The current AWE is $530.70.

  • Thirdly, the economic loss component of the lump sum is divided by the AWE.  The figure given represents the number of weeks during which the pension is not paid.  In all cases this figure is rounded down.

26.The following example shows how a lump sum preclusion period is calculated.  All the following details are hypothetical:

This example shows how a preclusion period is calculated.  A client receives a               settlement of $125,000.  50 % of this figure is determined as the component               which represents economic loss.  The average "all persons" weekly wage is               currently $530.70.

Lump sum$125,000

50%=   $62,500

Divided by

AWE   $530.70

Gives no of weeks117.76

Rounded down117

The rounded down figure of 117 represents the total number of weeks during which the person is precluded from payment.  The compensation affected component of the pension is not paid.  If the person is in receipt of any exempt payments such as Child Related Payments, these service pension payments continue to be paid.

Please note:the preclusion period for pension pay dates commences from the

first pay date after the event which gave rise to the change and

ends on the pay date following the last week of the preclusion

period.

Advice to a potential compensation payer or insurer

27.Where the Department is advised that a person has claimed a compensation payment, the Commission, in accordance with sections 59Y and 59ZE of the VEA, should issue a Preliminary Notice to the compensation payer or insurer liable to make the payment.  This Notice should state that the:

  • compensation payer or insurer must not make payment to the person if such a preliminary notice has been issued, unless the notice has been revoked or the Commission has given written permission to pay the compensation.  (refer Attachment C for an example)

28.The compensation payer or insurer is obliged by section 59Z and 59ZE of the VEA respectively, to notify the Department in writing within seven days if they become liable to pay compensation.  If such a Notice has been issued, section 59ZD of the VEA imposes penalties for compensation payers who contravene a preliminary notice by releasing compensation settlements without first deferring to the Department.  Section 59ZJ includes similar provisions for insurers.

29.Once advice is received from the compensation payer or insurer that an amount of compensation is payable, the Department will calculate the recoverable amount.  When the amount has been calculated, a further written advice is then to be issued in accordance with section 59ZA of the VEA for compensation payers and section 59ZG of the VEA for insurers.  This Notice specifies the recoverable amount sought by the Commission from the amount of compensation payable.  In this way the recoverable amount specified in such a notice can be deducted from the settlement and the residual compensation, if any, paid to the pensioner by the compensation payer or insurer.

30.A Recovery Notice specifies that a compensation payer or insurer must not make a payment of compensation until the Commonwealth has been paid the recoverable amount, or the Department has given it's permission.  This permission must be in writing to either the compensation payer to release the payments or the insurer to release payment to the compensation payer.

31.If a compensation payer or insurer does not respond to Departmental correspondence within specified time frames, the examiner should contact the company involved or its representative, to ascertain the reason for delay or non-response.  If a negative response is received from the company and or its representative, then further action may be required.  For instance, it may be appropriate to re-issue a Notice or remind the relevant party of their legal obligations.

32.Should the compensation payer or insurer make a payment of compensation disregarding the Department's Preliminary Notice or Recovery Notice, the examiner should consult with their manager Income Support.  It may be necessary for the manager, or their representative to then contact the Director, Policy Administration and Advice Section, Income Support Section, Canberra.  The Director will then be responsible for determining whether the case should be referred to the Australian Government Solicitor for recovery action.  Possible legal action may then be considered if the compensation payer or insurer still refuses to comply with a Notice.

Recovery Calculations

33.The recovery of payments already made to the client will only be possible where the person who receives the lump sum payment of compensation is in receipt of a "CAP".  Where the recipient of the compensation is not in receipt of a CAP those payments are inalienable.

34.Section 59R of the VEA specifies that the amount of service pension payments to be recovered in respect of a retrospective assessment of a grant of compensation are not to exceed that maximum amount of service pension paid during the period in which the person was in receipt of a CAP.  This section of the legislation also includes examples illustrating the affect of a retrospective assessment due to receipt of a lump sum compensation payment.

35.Should a pensioner who is under pension age claim a compensation payment from either a compensation payer or insurer without advising DVA and subsequently be awarded a settlement, DVA will take action to recover any overpaid service pension instalments.  Examples of calculating the recoverable amount for lump sum settlements can be found at Section 59R of the VEA, whilst those for periodic payment are given at section 59W of the VEA.


Receipt Of Compensation

36.The compensation provisions may affect both the person and the person's partner, regardless of who is the compensation recipient, providing they meet the specifications outlined in paragraphs 9 and 10.  Care should be taken to ensure that any re-assessment of service pension takes into account only CAP's.

Members Of A Couple Examples

37.Under the compensation provisions, where a veteran is a member of a couple and the veteran's partner is not in receipt of a CAP, all of the periodic payment is deducted from the veteran's service pension payment.  Where the veteran is over pension age and the partner is under pension age, any periodic payments of compensation received by the partner are deducted against the partner's service pension only.

38.Where members of a couple are both receiving a CAP, the CAP payable to each partner is reduced by half of the periodic compensation payments under the direct deduction principles.

39.Where members of a couple consist of a DVA client and a DSS client both in receipt of CAPs, the CAP is reduced by half of the periodic compensation payments for each.  DSS are amending their legislation to cover these situations.

40.Further examples of member of a couple situations are included in Appendix A.  These examples illustrate the changes in respect of members of a couple.  Only periodic compensation payment reductions are explained.  Further details on the calculation of a preclusion period and recovery of lump sum payments is elaborated in this instruction.  The topics have been divided up for simplicity and to better portray the effects of the proposed changes.

Examiner's please note:

Though Section 38 of the VEA precludes payment of a partner service pension where a veteran is not eligible to receive payment, the Repatriation Commission have agreed that where the veterans' service pension is cancelled due to receipt of compensation, their partner's entitlement to receive a service pension is not lost.

This action has been taken to remedy the situation where a partner, as a result of the application of the compensation provisions, might have apply for a DSS payment and subsequently, once their veteran partner becomes eligible for a DVA payment, transfer back to this Department.  Authority to amend the VEA to reflect this policy will be sought during the 1995 Parliamentary Sittings.

Ordinary Income

41.Where a person or both members of a couple are over pension age and they receive compensation, the compensation will be assessed as ordinary income.  However, if one member of a couple is over pension age and their partner is receiving a CAP then the periodic compensation amount will not be treated as ordinary income for that person, as the compensation will be deducted in full from their partner's CAP.

42.If a person or a member of a couple is under pension age and receives a CAP and periodic compensation payments, the amount of service pension paid will be calculated in accordance with the new provisions outlined in Section 59 of the VEA.

Income & Assets Tests

43.As in the example quoted at paragraph 20, any reduction in the rate of the CAP due to the operation of the ordinary income test should be applied before the direct deduction is made.  The compensation test is then applied to the rate of pension assessed after the income free area and the ordinary income test have been administered.

44.Any reduction in the rate of the CAP due to the operation of the asset test should be applied before the direct deduction is made.  The compensation test is then applied to the rate of pension assessed after the asset free area and the asset test have been administered.

Blinded Veterans

45.Blinded pensioners who are under pension age and who receive compensation payments will have their income support pensions assessed under these new provisions.

Restoration Of Pension At Pension Age

46.Where a client's pension is being reduced by a direct deduction and the client reaches pension age, the pension is re-assessed.  Any continuing periodic payments of compensation will then become assessed as ordinary income rather than applied as a direct deduction.

47.Where a couple are both in receipt of CAPs and one member of the couple reaches pension age, the service pension is reassessed.  The member who is still under pension age and therefore is still in receipt of a CAP, will have their service pension reduced by the total direct deduction amount.  The member who is of pension age is not affected by the amount of compensation paid by either direct deduction or under the ordinary income test.

48.Where both members of a couple reach pension age, their service pension is to be re-assessed taking into account either the lump sum or periodic payments of compensation under the ordinary income and assets tests.

Cessation Of Periodic Payment

49.A client may cease to receive periodic payments of compensation for a variety of reasons.  The main reason for this is generally due to the insurance company forcing the client to settle for a lump sum.

50.In these cases the client's pension is reassessed and any ongoing entitlement is reviewed based upon the pensioners residential and financial circumstances.  Investigation is carried out into the clients claim for a lump sum settlement.

Cessation Of Preclusion Period (Lump Sum)

51.At the cessation of a lump sum preclusion period the pension is restored.  Up to date income and asset details of the clients circumstances are to be obtained.


Income Support Supplement And Standard Rate for Partners

52.Clients granted Income Support Supplement (ISS) and partner service pension at the standard rate after 20 March 1995 are subject to these new compensation provisions.  An overview of general information is therefore presented in the instruction.  Detailed guidelines concerning these pension types and the effect receipt of compensation will have on their entitlements will be included in departmental instructions to be issued in March and April 1995.

53.Of the clients granted the new ISS and the partner service pension at the standard rate, there will be ex-DSS clients who are transferring to DVA.  Amongst these, there may be a small number of pensioners who are in receipt of a CAP at DSS.

54.For the purpose of this initiative, when assessing these clients, their original date of grant of the DSS pension and compensation payment award should be considered (paragraph 9 includes relevant dates).  Legislative amendments will ensure that affected pensioners currently being assessed at DSS under the compensation provisions remain under the compensation provisions at DVA.

55.If an ISS or standard rate client is subject to a preclusion period at DSS, that preclusion period will still apply.  The rationale for this being to avoid any perceived advantages or disadvantages in transferring to DVA.  (Note: Existing DVA clients will only be affected where they have a lump sum payment of compensation settled after 1 January 1995.)

56.Compensation details are to be obtained as part of the transfer process of clients from DSS to the new ISS and standard rate.  This information will be used to determine their entitlement for those pensioners assessed to have a "CAP".

Child Related Payments (CRP)

57.The following Child Related Payments (CRP) are exempt under the compensation provisions where there are dependent children:

  • Dependent Child Add-On;

  • Guardian Allowance;

  • Total amount of Rent Assistance; and

  • Total amount of Remote Area Allowance.

58.Where a client who is in receipt of a CAP, is receiving CRP, the effect on their rate will be limited to service pension and allowances other than CRP.

59.Where a client currently has their pension reduced to less than total CRP, the client must be informed that basic family payment (BFP) and additional family payment (AFP) are available at DSS.  If they chose to receive BFP and AFP from DSS their service pension will be cancelled and they will lose entitlement to a PCC.  However, if they receive maximum rate AFP they will qualify for a health benefits card from DSS which will entitle them to, free ambulance, pharmaceutical concessions and bulk billing.

60.Where their Child Related Payments are already reduced because of other assessable income they should be advised to go to DSS and enquire as to their eligibility for AFP.  This action should be taken as the AFP paid by DSS is calculated using the person's taxable income rather than assessed income as applies under the income and assets tests.


Rent Assistance

61.Rent assistance in its own right is not an exempt payment.  Only where the client is in receipt of CRP, is the rent assistance to be exempt.

Remote Area Allowance

62.Remote area allowance may be affected by these provisions.  Remote area allowance will be cancelled if basic service pension ceases to be payable unless CRP continues to be paid.

Pharmaceutical Allowance

63.Pharmaceutical Allowance (PA) can be a CAP and therefore, (unless the pensioner is a war widow/er or a veteran with an accepted disability), if basic service pension is reduced to nil (following the dollar for dollar deduction), PA will also be cancelled.  Payment of a CRP, without basic service pension, does not give rise to eligibility to receive PA.

Entitlement Treatment and Fringe Benefits

64.If a pensioner is in receipt of a CAP and is receiving a reduced service pension then any compensation that would have previously been assessed as ordinary income will not be maintained in their assessment for treatment purposes.  For example:

a single veteran who has regular compensation income of $300 per week was not eligible for treatment at departmental expenses prior to 1 January 1995.  Upon the introduction of this initiative, the compensation payment is deducted off the veteran's service pension on a dollar for dollar basis but is not included as ordinary income when assessing his/her treatment eligibility.  The net result would be that although the veteran would receive less income support, he/she may attain treatment at Departmental expense.

65.If however, the service pensioner loses their total payment due to direct deduction there are no provisions allowing the saving of either treatment or Pensioner Concession Cards.

Requirement To Pursue Compensation Award

66.Legislative obligations will be placed upon clients where it is indicated, from information provided, that the client or the partner is entitled, or may be entitled, to compensation.

67.Payment of a CAP can be withheld where a client or partner fails to take action to claim or obtain compensation.

68.The client or partner could be considered to have taken reasonable action to claim compensation by:

  • lodging a claim with the employer or insurer; or

  • engaging a solicitor to commence legal proceedings; or

  • seeking legal advice as to whether a claim for compensation can be successfully pursued.


69.The following examples may, depending on the full circumstances of each case be acceptable reasons for a client or partner not claiming compensation:

  • there is no enforceable claim for compensation; or

  • the accident occurred many years ago and is now statute barred; or

  • legal proceedings are required but the client or partner cannot afford to engage a solicitor and is not qualified for legal aid; or

  • the injuries sustained will not result in the client or partner suffering a loss of wages, salary or loss of earning capacity; or

  • there is a question of significant contributory negligence.  This may occur where the client or partner caused his or her own injury, for example the client was intoxicated whilst on duty.

70.There are likely to be situations where a client or partner is unable to immediately claim compensation.  For example:

  • the client or partner is hospitalised or otherwise incapacitated; or

  • the client or partner has little or no English and is unaware or unsure of his or her obligations; or

  • for cultural reasons the client or partner may be reluctant to claim compensation because of some perceived stigma in doing so.

71.Where a client or partner agrees to lodge a claim for compensation, payment should not commence or continue to be paid until this action has been verified.  Under no circumstances should payment commence or continue until the client can provide details of the claim or acceptable reasons for not claiming compensation.

72.Where a client or partner refuses to claim compensation, the client should be advised in writing of what action needs to be taken to satisfy the requirements of the legislation.  If after 14 days, the client or partner has not undertaken the action to claim compensation, and no acceptable reason has been given for not doing so, service pension is to be initially suspended pending cancellation.  Authority for this action is outlined in Section 56EB(1) (VEA).

73.Where it has been established that a person has taken reasonable action to claim compensation, the situation should be regularly reviewed to ensure that all reasonable steps are being taken to obtain the compensation.  For example, that the person is complying with all reasonable requests from the insurer for information necessary to settle the claim.

74.In some cases a person may already have lodged a claim for compensation or be receiving periodic payments of compensation at the time a CAP is claimed.  If, however, after the grant of the CAP the person foregoes their entitlement to compensation, payment of the service pension should be suspended.

75.The person should be advised that the payment of service pension will only recommence when evidence of his or her efforts to obtain compensation is provided.

76.There may be situations where a person is unable to proceed with his or her compensation claim.  Determining what are acceptable reasons for not pursuing a claim will depend on consideration of all the facts of each case.  The following examples may be considered reasonable:

  • legal proceedings are required to pursue the claim but the person cannot afford to engage a solicitor and is not qualified to receive legal aid; or

  • legal advice to the person is that there is little or no likelihood of successfully pursuing the claim; or

  • it will be some time before the claim is settled and pursuing the claim further would place undue strain on the person's physical and/or mental health.

Actioning of Cases

77.Compensation affected cases may result in either the limitation or cancellation of service pension.  Due to the small number of cases affected by this initiative, a fully automated system to take into account this legislative change has not been developed.  As a result, existing systems are being utilised to effect service pension variations and monitor the implementation.

Cancellation of Service Pension

78.Cases resulting in a nil payment can be actioned through the Pensions Information Processing System (PIPS), however, a manual advice will need to be issued.  A sample of a cancellation advice can be found at attachment B.

79.When actioning a cancellation case, examiners will be required to update the Personal Assessment screen (PP.PA) setting an indicator of "N" for service pension eligibility.

Reduction in Amount Payable

80.Where service pension is reduced as a result of applying the $1 for $1 direct deduction, the pension assessment will need to be recorded using the Manual Rates screen (PP.MR).

81.There may be cases, where as well as compensation payments, the assessment includes variable income sources, such as, from shares and managed investments.  In such cases it may be appropriate for examiners to use a limitation code rather than cancel service pension if the assessment results in a nil payment.  This could occur where there is a likelihood that reduction in ordinary income could lead to a re-instatement of payment of service pension.  This will ensure ongoing monitoring of the case which would not be possible if the payment was cancelled outright.  The code to be used on the Payment Master File in such cases is 7191.

82.Limitation codes may also be appropriate when actioning a reduction or cancellation for a service pensioner who is going to turn age pension age within six months rather than cancelling all pensions data from the system as would occur with an automatic cancellation action.  Of course, as with any limitation case, a manual payment advice will be required for such cases.

83.Where the partner of a veteran service pension has been cancelled due to receipt of compensation but the veteran is still in receipt, he/she is to be assessed at the (standard) single rate of service pension. To ensure correct details are recorded and the partner's income and asset details maintained on the system the following procedures should be followed:

  • Access Assessment Control screen, enter effective date and include Veteran and partner in assessment;

  • Access the Trial screen to ascertain what rate of pension would be paid if compensation payments are not taken into account under the ordinary income test;

  • Access the Personal Assessment screen and enter "N' for service pension eligibility for the partner;

  • Access the Manual Rates screen to enter the Veterans' correct rate of service pension and taxable pension details, and if appropriate, the treatment eligibility indicator, and recorded the partner's rate as nil;

  • The Historic Dates screen may also need to be accessed and updated in some cases.

Off Set Clauses

84.Some insurance policies contain an "off set clause" which allows insurers to reduce the amount payable under a policy by the amount of Social Security or Veterans' Affairs income support payments made to the person pending the outcome of the insurance claim.  This means that the insurers can reduce their liability to pay the full amount payable under the insurance policy by "shifting" part of the cost on to the Commonwealth.

85.Where an offset provision is inforce, examiners are to assess the gross amount compensation actually being paid to the veteran or partner.  It is expected that following this assessment, the pensioner will advise the compensation payer or insurer that they are not receiving their maximum income support entitlement and seek an increase in payment from them.  In such circumstances it will be appropriate to issue a Notice, (based on those found at attachment C of this instruction) to the compensation payer or insurer.

Contributions by Compensation Recipient

86.Subsection 5NB(4) of VEA ensures that for the purposes of the compensation recovery provisions, "compensation" does not include a compensation payment if the recipient has made contributions (for example by way of insurance premiums or superannuation contributions) towards the payment.  Therefore where a pensioner is in receipt of a compensation payment that they have personally contributed to, they will have that payment assessed as ordinary income under the income and assets tests.

Reviews

87.Once a service pensioner reaches pension age, neither a limitation nor a preclusion period will apply and any ongoing compensation payments will be recorded as ordinary income.  To ensure that service pension is paid at the correct rate or that the pensioner is advised to re-apply for service pension as soon as they become eligible, a review date will be recorded for all compensation affected cases.  State Offices can utilise their preferred system for monitoring such cases, using a resubmit system or D5515s.

88.If you have any further matters to discuss in relation to these guidelines or with any other aspect concerning the implementation of this initiative, please contact the Project Officer, Bill Harper on (03) 284 6306 or the Assistant Director, Nigel Parmenter (03) 284-6361.

MAURIE GALT

A/G ASSISTANT SECRETARY

INCOME SUPPORT

    January 1995


APPENDIX A

It should be noted that this list of examples is not extensive and is provided as a guide only.

  • BOTH IN RECEIPT OF A COMPENSATION AFFECTED PAYMENT

Male is in receipt of invalidity service pension, female is in receipt of partner service pension, they are both receiving a CAP as they are both under pension age.  Compensation is being paid periodically in respect of either partner.  Half the amount of compensation is a direct deduction from each of the payments.

If the compensation amount payable exceeds the service pension payment then the case can be processed using a D2650 with examiners updating the pensioners personal assessment screen with "N" for service pension eligibility.

If the veteran in such an assessment has a disability accepted, then their payment of pharmaceutical allowance will increase from $2.60 to $5.20, with effect from the date of cancellation of service pension.

If the veteran in such an example is going to attain pension age within the next six months, then the examiner may use the Manual Rates screen to record a taxable service pension of "Nil" and use a "MS" submission entering a total limitation, so as to retain income and asset details for future processing.

  • ONE IN RECEIPT OF A COMPENSATION AFFECTED PAYMENT,  THE OTHER IN RECEIPT OF A NON COMPENSATION AFFECTED PAYMENT

Male is in receipt of invalidity service pension, which is a CAP because he is under pension age and female is in receipt of age service pension, which is a non CAP.  Compensation is being paid in respect of either the wife or the husband.  The full amount is a direct deduction from his invalidity service pension, her age service pension is not affected by either direct deduction or as ordinary income.

  • ONE IN RECEIPT OF A COMPENSATION AFFECTED PAYMENT, OTHER NOT IN RECEIPT OF A PENSION

Female is in receipt of invalidity service pension, which is a CAP because she is under pension age, male is not in receipt of pension.  Compensation is being paid in respect of either the wife or the husband.  The full amount is treated as a direct deduction from her invalidity service pension.  If the husband claims a CAP at a later date, half the amount will be treated as a direct deduction from his CAP and half will be treated as a direct deduction from her invalidity service pension.


  • ONE IN RECEIPT OF A COMPENSATION AFFECTED PAYMENT AT DVA, ONE IN RECEIPT OF A COMPENSATION AFFECTED PAYMENT AT DSS

DVA client is in receipt of invalidity service pension, which is a CAP as both are under pension age, partner is in receipt of a CAP at DSS.  Compensation is being paid in respect of either the wife or the husband.  Half the amount is treated as a direct deduction from each of the two respective CAPs at the two departments.

  • ONE IN RECEIPT OF A NON COMPENSATION AFFECTED PAYMENT, OTHER NOT IN RECEIPT OF PENSION

Female is in receipt of age service pension, which is a non CAP, male is not in receipt of pension.  Compensation is being paid in respect of either the wife or the husband.  It is treated as ordinary income for her age service pension.  If he claims a CAP at a later date the full amount will be treated as a direct deduction from his CAP.

  • ONE IN RECEIPT OF A COMPENSATION AFFECTED PAYMENT AND PENSION IS TOTALLY LIMITED, OTHER IS IN RECEIPT OF A NON COMPENSATION AFFECTED PAYMENT

Female is in receipt of partner service pension, which is a CAP as she is under pension age.  Pension has been reduced to nil due to direct deduction.  Male is in receipt of age service pension.  His age service pension is not affected by her receipt of compensation by either direct deduction or by having it included in his assessment as ordinary income.

  • BOTH UNDER PENSION AGE WITH CHILD RELATED PAYMENTS

If compensation exceeds the amount of basic service pension payable then the following procedure will need to be actioned.  On the partner's personal assessment screen a "N" for service pension eligibility will need to be entered.  On the Manual Rates screen, for the veteran, the child related payment amount should be entered as a service pension amount, with the taxable amount recorded as "Nil".  Partner's rate of service pension is to be recorded as "Nil".  Veteran will not be eligible to receive a pharmaceutical allowance.  To ensure PA is not paid a limitation code may need to be placed on the Payment Master File.


ATTACHMENT B

CANCELLATION LETTER - PERIODIC PAYMENTS

BRANCH OFFICE LETTERHEAD

Dear Pensioner ( Name)

Your service pension has been cancelled from  --/--/1995 because you are receiving compensation payments of $---.-- per week.

Should your circumstances change you should contact your nearest Branch Office of Department of Veterans' Affairs for assistance.

As your service pension has been cancelled you are no-longer eligible to use your Pensioner Concession Card (PCC).  Please return your (1995) PCC to this office.

Please keep this notice in a safe place as it may help should you need to make another claim in the future should you cease to receive your compensation payment or turn pension age (male/female - insert date).

Your right of review

If you do not agree with a decision affecting your rate of service pension, you may apply to have it reviewed by a Delegate of the Repatriation Commission.  The Delegate may decide the original decision was correct, or may decide to change it.  If the decision is changed, your pension may be increased or reduced.

Any request for a review must be made in writing within three months of the day you receive this letter.  Your letter should state the specific grounds for your request for review.

Signatory for Deputy Commissioner


CANCELLATION LETTER - LUMP SUM

BRANCH OFFICE LETTERHEAD

Dear  Pensioner,

This letter explains the effect the lump sum settlement of compensation paid to you has upon your service pension entitlement.

Under Section 59S of the Veterans' Entitlement Act 1986, a lump sum preclusion period is calculated when a person receives a compensation settlement.

The lump sum preclusion period is calculated by dividing the compensation part for loss of earnings by the average weekly earnings figure (A.W.E.) published prior to settlement by the Australian Statistician.

The division results in a period of weeks being calculated which commences from the date payment of compensation was made.

The calculation in respect of the compensation paid to you is as follows:-

Date of settlement:

Start Date of preclusion:

End Date of preclusion:

Total settlement:

Compensation for loss of earnings part:

Accordingly, during the period **/**/**** to **/**/**** you will not be entitled to receive a service pension or benefits.

As your service pension has been cancelled you are no longer eligible to use your Pensioner Concession Card (PCC).  Please return your (1995) PCC to this office.

When (you turn pension age/the preclusion period ceases)(insert date) you will become eligible to re-apply for a service pension.  Please contact the Department of Veterans' Affairs by (insert date a fortnight before birthday or end of preclusion period) to lodge your claim.

If you have any queries regarding this letter please contact your nearest Branch Office of Department of Veterans' Affairs for assistance.

If you do not agree with a decision affecting your rate of service pension, you may apply to have it reviewed by a Delegate of the Repatriation Commission.  The Delegate may decide the original decision was correct, or may decide to change it.  If the decision is changed, your pension may be increased or reduced.

Any request for a review must be made in writing within three months of the day you receive this letter.  Your letter should state the specific grounds for your request for review.

Signatory for Deputy Commissioner


ATTACHMENT C

Note:this is a sample only - wording may be amended according to individual case circumstances

Standard Letter Head/Contact Name/Reference etc

Addressed to Compensation Payer/Insurer.

Salutation

Name: (Veterans Family and Given Name)

Claim for Damages as a result of (Type of accident) on (Date of Accident)

I understand that the (above named person) has made a claim for compensation (sickness, accident, workers compensation).

This is a Preliminary Notice sent in accordance with section 59Z (Compensation Payer)( or 59ZE Insurer) of the Veterans' Entitlements Act 1986 to advise you that should (above named) become entitled to receive any settlement or payment whatsoever you are obliged to notify the Commission, or its delegate, in writing within seven days and prior to any proceeds being advanced to (above named).  Payments include those made without acceptance of liability or those made through a successful claim in either a court of law or through an out of court settlement.

This Notice remains inforce unless it is formally revoked by the Repatriation Commission or its delegate, or the Commission, or its delegate, has given written permission to pay compensation to the (above named).

You should be aware that section 59ZD of the Veterans' Entitlements Act 1986 (Compensation Payer) (section 59ZJ Insurer) imposes penalties for failure to notify the Commission, or its delegate, in writing within seven days, if you commence to pay or become liable to pay compensation.

Once you have notified the Commission, or its delegate, of any amount that is payable, a further written advice will be issued to you in accordance with section 59ZA (Compensation Payer) of the Veterans' Entitlements Act 1986 (or section 59ZG Insurer).  This Recovery Notice specifies the recoverable amount sought by the Commission, on behalf of the Commonwealth, from the amount of compensation payable.  In this way the recoverable amount specified in such a notice can be deducted from the settlement and the residual compensation, if any, paid to the pensioner by the compensation payer or insurer.

Should you have any enquiries or need further information please telephone.......

Delegate of the Commission


Standard Letter Head/Contact Name/Reference etc

Points to be included in a Recovery Notice to be addressed to Compensation Payer or Insurer

(note: in accordance with section 59ZK of the Veterans' Entitlements Act 1986, a Recovery Notice can only be issued to either a Compensation Payer or an Insurer, not to both.) .

Salutation

Name: (Veterans Family and Given Name)

Claim for Damages as a result of (Type of accident) on (Date of Accident)

Compensation Payer or Insurer's Reference Number

Letter to include details:

  • it has come to notice that (above named person) was awarded compensation on (date) or  thank you for advice of (date) concerning the forthcoming award of damages etc;

  • a Preliminary Notice was issued to you on (date);

  • this Notice (or These Notices) placed a statutory obligation upon you not to release any payment of compensation until the amount claimed by the Commonwealth had been refunded;

  • you should note that payment of compensation should not be released without this Department's written advice;

  • accordingly, under the terms of section 59ZA (Compensation Payer) or section 59ZG (Insurer) of the Veterans' Entitlements Act 1986, the Department is now seeking recovery of ($ the recoverable amount) within fourteen days of this notice being issued;

  • unless a response is received within fourteen days, this matter will be referred to the Australian Government Solicitor;

  • a penalty of 12 months imprisonment and/or a fine can be imposed on an individual convicted of releasing a compensation payment in breach of a Preliminary Notice and/or Recovery Notice.  Such a fine, in the case of a body corporate, can be increased up to five times the fine applicable to an individual.

Should you have any enquiries or need further information please telephone.......

Delegate of the Commission