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Ch 1 Overview


This chapter is about weekly compensation for incapacity for work, i.e. 'incapacity payments'. As with any compensation benefit, these payments may only be made where the Commonwealth has accepted liability for the medical condition causing the incapacity. Therefore, if you have not already done so, you should read the overview at the head of the Liability handbook.

Incapacity payments are made to injured employees who are either unable to earn an income or whose ability to earn an income is now less than pre-injury levels. Of course, the delegate must be satisfied that it is the compensable injury that has caused this incapacity, (i.e. either directly or by contribution) and not some other cause.

Note also, that 'incapacity' does not mean the same thing as a 'disability' under the VEA. 'Incapacity' for the SRCA relates very specifically to the ability to engage in suitable employment. Incapacity is not determined on the basis of pain, suffering, functional loss or bodily impairment, except in so far as these have a direct and medically certified effect upon the employee's capacity to engage in suitable employment.

As the intent of the Act is to compensate for a loss of earnings due to incapacity for work, the entitled amount is not a flat rate but varies with each client, i.e. depending on the amount of income lost in each case. Determining the amount to which the client is entitled is often a complex process. The Act requires that weekly payments for incapacity be calculated according to formulae which take into account the former salary, (i.e. Normal Weekly Earnings) the current earnings and/or deemed earning power, (Able-to-Earn in defined Suitable Employment), and the amount of superannuation also received. Other considerations include the length of time already on incapacity benefit and any hours actually worked or involved in a rehabilitation program. There are also defined maximum and minimum levels of compensation dependent on total income. These have separate criteria for application.

Calculation of an actual dollar entitlement can be a complex matter involving many factors. However, delegates are aided to a large degree by the use of the Defcare Incapacity Calculator, which takes all issues into account. Use of the calculator is mandatory for all delegates determining weekly payments. Therefore, while a considerable portion of this handbook is devoted to detailed calculation of the amount payable, in practice delegates should expect to spend the larger part of their time and their decision making skills validating the basis for entitlement.

DVA deals only with claims from members of the Defence Force. An injured full-time member seldom loses income while continuing to serve. ADF members continue to receive pay, free medical treatment and other benefits even though unable to report for duty. Thus, most claims for incapacity payments come from persons who have already discharged from the ADF. There are exceptions however and some serving ADF members who have lost pay levels and allowances due to an injury – via an imposed change to a less remunerative ADF role – may claim a top-up payment to that former level whilst still serving.

In-service top-up of ADF salary actually forms a very small minority of incapacity cases. The overwhelming majority of weekly payments are made to ex-members of the ADF. Many of those ex-members were involuntarily discharged from the ADF because of the effects of a compensable injury.

On the other hand, a large proportion of incapacitated clients actually discharged voluntarily from the ADF. Although injured at some time in their career, they were able to continue to meet the physical requirements of that employment and continued to serve, ultimately discharging at their own request. However following discharge – in some cases many years after serving – some ex-members subsequently suffer an incapacitating recurrence or worsening of their compensable condition(s).

All applications for incapacity payments relate to an alleged loss of income and must be accorded a high priority. Involuntary medical discharges in particular, carry the highest degree of urgency because they involve not only a clear and immediate loss of all income, but the loss of ADF employment frequently means the loss of residence and termination of usual social supports as well. Following the establishment of the Transition Management Service in November 2001, rehabilitation coordinators now have a responsibility to review the circumstances of all ADF members identified for medical discharge (including those whose medical condition is not compensable). TMS delegates support those individuals through the discharge process, and assist those with an apparent case for compensation firstly to establish liability and then to claim incapacity payments, if appropriate. It is vital that incapacity claims managers and rehabilitation coordinators liaise closely on the management of all incapacity cases, but particularly to ensure that for medically discharged members, incapacity payments replace the ADF salary seamlessly, i.e. from the day of discharge.

Medical dischargees are, virtually by definition, incapacitated for ADF employment. However, not all members who have been involuntarily medically discharged are incapacitated for all civilian employment. The ADF requires – as a condition of continued employment – very high standards of personal physical fitness and functional ability from its members. All ADF members must be able to fight as well as perform a peacetime role. This means that they must be capable of deployment to operational (warlike) service, and to reliably perform physically and mentally demanding tasks under combat conditions and in locations where there may be no medical support for an ongoing condition. An injured member may therefore be involuntarily medically discharged from the ADF for a failure to meet the high fitness and health standards for deployment, yet still be capable of earning an equivalent income in alternative civilian employment. This is because civilian employment does not of course require combat readiness or the ability to serve in a war zone.

Nevertheless, and regardless of the residual capacity for civilian employment, a medical discharge demonstrates incapacity for the ADF employment at least. On the basis of that loss alone, it is DVA policy to accept that involuntary discharge as certification of up to four weeks incapacity, from the date of discharge (though not, of course, beyond the start-date of any civilian employment commenced during that same period.) Following this four week period of grace, all clients must – if payments are to continue – produce further medical certificates to demonstrate continuing incapacity for civilian employment. They are also identified as rehabilitation clients and the usual assessment processes implemented.

Members who take a voluntary discharge however, have no four week period of grace. They must provide in the first instance, not only current medical certificates to show that they are now incapacitated by their (military) injury for their post-discharge (civilian) work, but further medical evidence to demonstrate that this degree of incapacity has actually worsened since the date of voluntary discharge.

Medical certificates of incapacity for work, are required to be from a 'legally qualified medical practitioner'. Certificates from physiotherapists and other para-professionals are not acceptable. Medical certificates must also be for a closed period. Open-ended certificates or those alleging 'total and permanent' incapacity are generally not acceptable, even in cases where the client has suffered a severe and permanent medical condition.

Cases of incapacity of members of the Reserves are quite distinct from those of incapacitated full-time members. Reservists, being part-time members of the ADF, are paid only for the hours of attendance with the bulk of their income coming from full-time civilian employment. However, an injury received during Reserves duty may incapacitate for both Reserves activities and civilian employment. The ADF is unable to support injured reservists with a full-time salary and free medical treatment as it does for injured full-time members. Injured reservists' financial needs are therefore immediate, and their claims for incapacity payment are of high priority. Payments to reservists must take into account both military and civilian income, and the associated processes include substantial verification, privacy and taxation issues which do not apply to discharged full-time members. DVA has also made special policy provisions for reservists who did not also have civilian employment at the time of injury.

On the other hand, claims from reservists injured during periods of full-time service are dealt with on the same basis as those of members of the permanent full-time force. It is important to remember that there is a clear distinction between a period of time where a Reservist is working on a contract for a period of full-time service and working say 4 weeks every day whilst on a training course and the like. The main difference is that for full-time service there is a set period of employment with confirmatory paperwork from the appropriate career management of Defence.

An initial determination of incapacity payments does not close the case nor authorise benefits to continue indefinitely, i.e. beyond the authorised period. Incapacity payments are not a pension, nor are they payable in respect of mere unemployment. Incapacity payments must relate to an actual inability to engage in any employment, and may only be made for the period specified by an actual medical certificate of incapacity. Alternatively, payments may be made for the duration of a vocational rehabilitation program, thus, payments are always conditional on the employee's demonstrated circumstances, meaning the entitlement is not continuous but must be verified period by period. Weekly incapacity payments must cease when the employee is no longer incapacitated for employment, no longer suffers a loss of income and/or is no longer engaged on a formal rehabilitation program. Incapacity payments are also terminated by suspension where the employee fails to attend medical examinations required by the delegate, or defaults on vocational rehabilitation responsibilities.

Clients in receipt of weekly incapacity payments may be required to participate in a program of vocational rehabilitation under S37 of the SRCA. Rehabilitation is the most important single element in the progression and eventual termination of incapacity claims. It may involve such measures as skills testing and counselling, physical 'work hardening', work experience placements with potential employers or training in specific skills and more. Rehabilitation is of benefit both to the client and to the Commonwealth, in that the principle aim is to return the client to work of some kind (and thus to the community generally), to the maximum of his/her residual capacity. Rehabilitation Coordinators are responsible for managing the conduct of the program by instructing and monitoring external providers, and for intervening from time to time to achieve the best outcomes.

Maximisation of work capacity via rehabilitation processes obviously has an impact on the amount of benefit payable and is a matter in which all delegates are required to take an interest. Delegates responsible for managing incapacity claims must refer those clients who are not yet on a rehab program to a rehab coordinator for assessment and formulation of a rehab strategy. Incapacity claims managers must also liaise with the coordinator about the client's changing circumstances and entitlements, in fact the two arms – rehabilitation and claims management – should operate as a team to progress the case.

Clients engaged in a rehabilitation program are entitled (for the duration of that program only) to weekly payments as if incapacitated, even if the medical condition has improved and of itself no longer prevents employment. The level of the weekly payments may vary during the program, depending on the level of participation. However, it is expected that incapacity for work will have ceased or at least decreased by the end of a successful program, thus reducing or eliminating the entitlement to payment once that program has ceased. For these reasons, delegates determining incapacity claims or the administration of continuing payments are required to liaise closely with Rehabilitation Coordinators about conduct of the case.

At the termination of a rehabilitation program, a delegate may determine that the client is now able to engage in suitable civilian employment and earn an income at a particular level, taking into account factors specified by the SRCA and the skills and abilities demonstrated during the rehabilitation program. This new 'able-to-earn' (AE) amount may reduce or terminate the entitlement to weekly incapacity payments, depending on circumstances.

In some cases the AE amount is still significantly less than the person was earning in the ADF and there is therefore an entitlement for ongoing 'top-up' incapacity payments. Where however, these weekly payments are at a rate below a threshold specified by the Act and medical/rehabilitation assessments demonstrate that this entitlement is unlikely to change, the delegate is required to 'redeem' further payments by issuing a lump sum in lieu.

Despite medical treatment and vocational rehabilitation assistance, some incapacity cases may result in continuous, long-term payment. However, payments should never be regarded as automatic, or as a de-facto pension. Delegates are required to monitor all cases involving ongoing payments, and to regularly review the client's circumstances, employment, standard of medical certification, remedial medical treatment and need for further rehabilitation assistance etc. Defcare automatically raises tasks for review of claims at certain milestones. These include after various cumulative periods of incapacity, attaining specific ages, after 45 weeks incapacity.

Incapacity payments may also impact on the client's entitlements to payment under other Acts. Clients may have a dual entitlement for compensation for a particular injury i.e. under both the SRCA (or its predecessors) and also the Veterans' Entitlements Act (VEA). However, simultaneous payments by the Commonwealth under both Acts for the same state of incapacity would represent double dipping by the client. The SRCA therefore requires delegates to inform VEA administrators whenever weekly incapacity payments are to be made to a person with a potential dual entitlement. The VEA administrators in turn, 'limit' (i.e. reduce or cease) VEA pensions appropriately and formally require the SRCA delegate to deduct any overpaid VEA pension from the SRCA entitlement.

Similarly, clients may not simultaneously access both SRCA incapacity payments from DVA and Social Security payments from Centrelink. A formal notification and recovery process applies.

Employees who were injured during the currency of the 1971 and the 1930 Acts still have access to incapacity payments under the SRCA. For all periods of incapacity after December 1988 the entitlement is calculated on the same basis as a person who had been injured under the current Act. The old Act's statutory rates and method of calculation applies only to those periods of incapacity which occurred during the currency of that old Act. However as an exception to that rule, those persons who were actually receiving payments under the 1971 Act on the SRCA's commencing day are titled 'former employees' and their entitlements are calculated separately i.e. by a method specified in the transitional provisions of the SRCA.

Occasionally clients may elect to take legal action against third parties rather than access compensation (e.g. for injuries in a travel-to-work vehicle accident). This issue is dealt with at length in the Liability Handbook.

Briefly, however, Section 44 of the SRCA prevents employees from taking action for damages against the Commonwealth, (with some exceptions i.e. the limited-scope actions under S45 for non-economic loss only, in lieu of a permanent impairment lump sum.) While actions are possible against those third parties allegedly responsible for an accident, the finalisation of that action requires the return to DVA of all compensation paid to that point, and furthermore cancels all further SRCA entitlement to any form of compensation.

On the other hand, incapacity payments relating to some old Act ('71) entitlements may be restored if and when the client can demonstrate the court awarded damages have been exhausted on injury-related expenses.

For actions under the SRCA however, the termination of entitlement is absolute.