9.10.4 Compensation Offsetting and War Widow's/Widower's Pension or Orphan's Pension

Last amended: 9 September 2021

Entitlement to a Gold Card

War widows/widowers and orphans retain their entitlements to a Gold Repatriation Health Card regardless of compensation offsetting.    

Energy Supplement

Energy supplement payable to war widows/widowers is not offset.

Veterans' Children Education Scheme (VCES)

Compensation offsetting does not offset benefits provided under the VCES.    

How an award of compensation or damages affects a war widow's/widower's pension

Where a war widow's/widower's pension is in payment and a lump sum of compensation is later paid for a veteran's death, the VEA deems that the fortnightly equivalent pension to have started when the war widow's or orphan's pension started. Thus future payments of these pensions are reduced and retrospectively some or all of the pension already paid may become not payable. This constitutes an overpayment that must be recovered. Where DVA is aware of other compensation claims, recovery by a deduction from the lump sum is normally arranged through the veteran's solicitor or from the payment made under the DRCA, if administered by DVA.

How compensation following death paid under DRCA reduces war widows/widower's and orphans pension if paid for the same death

Subsection 17(3) of the DRCA provides that a single lump sum compensation payment is to be divided amongst the deceased client's dependants as compensation following death.  The DRCA allows discretion to divide and disperse the lump sum as the delegate deems appropriate – in most situations, the lump sum is divided amongst the widow and the dependent child/children.  However, for the purpose of compensation offsetting the total amount of the lump sum is converted into a single fortnightly equivalent and offset against the relevant DVA pension/s irrespective of whether it has been shared between more than one dependent.

The DRCA also provides a weekly amount of compensation that is payable for dependent child/children under subsection 17(5).  This periodic payment is added to the fortnightly equivalent calculated from the lump sum compensation following death paid under Section 17(3) of the DRCA to arrive at a total fortnightly offset amount from the compensation paid in respect of the client's death.  Once the two amounts are combined, there is a specific order of reduction when pension is payable to more than one dependant.

Subsections 30C(8) - 30C(12), 30D(5) - 30D(8), 74(9) - 74(12) of the VEA define the order a dependant's pension should be reduced where compensation offsetting applies.  The payment of the war widow/widower is preferred over the dependant child/children, meaning that any orphans pension payable is the first to be offset completely with any residual amount of fortnightly equivalent to be offset against the war widow's/widower's pension.  The order in which a pension should be reduced to nil by compensation offsetting is as follows:

1. The younger child
2. The older child
3. The war widow/widower

Overseas war widow's/widower's pensions

If a person is assessed as receiving an overseas payment that is similar in character to the Australian war widow's/widower's pension paid under the VEA for the death of the same veteran, compensation offsetting will apply.  The war widow's/widower's pension paid by DVA will be reduced on a dollar for dollar basis by the amount of the foreign pension.

To be similar in character to an Australian war widow's/widower's pension, the payment from overseas should represent a compensation payment for the same death of the person's partner due to war-caused or war-related injury or disease arising out of the partner's war service, in connection with war or warlike operations in which the Crown has been engaged.  Provided that the payments are compensatory in nature rather than an income support payment, the test of being similar in nature is satisfied.

Compensation offsetting and adjusted income for income support supplement purposes

Any compensation payment offset against a war widow's/widower's pension is not counted again for offsetting against an income support supplement. However, the compensation amounts continue to be assessed as part of the client's overall adjusted income, when determining their ISS payability. The assessment of the full compensation amounts as income (and therefore as a component of adjusted income) occurs because they are not an excluded income amount under the VEA. Compensation payments which reduce a disability compensation payment are excluded income.     

However, war widow/er pensions are not assessed as being disability compensation payment for the purposes of excluding the offsetting compensation payments from the definition of income.     

Any other compensation or damages, including any residual amount of compensation not used for offsetting against war widow's/widower's pension, are also part of the war widow/er's adjusted income and may affect the rate of ISS payability under the adjusted income test.

Compensation-offset WWP and compensation recovery

Any compensation payment that limits a person's war widow/er pension is excluded from the compensation recovery provisions.     

However, where there are residual compensation amounts (after offsetting), and the ISS payment is a compensation-affected payment (CAP), ISS may be reduced on a dollar for dollar basis under the compensation recovery rules. For assessment under the compensation recovery rules to arise, it is necessary that the residual compensation amounts payable in respect of the death of the person also be in respect of economic loss. This test requires that the payments represent compensation for lost earnings or lost capacity to earn. Where the economic loss test is not satisfied, Part IIIC does not apply and any residual compensation payments (after offsetting) are assessed as income only.

Compensation offsetting and income support supplement ceiling rate

Where the war widow's/widower's pension paid under Part II or Part IV of the VEA is offset by a compensation payment, a higher ceiling rate of ISS may be payable. The Rate Calculator for ISS allows the usual ceiling rate to be increased by the same amount that the WWP is limited by the compensation payment.   

Please Note:  In accordance with the relevant legislative provisions, the higher ceiling rate of ISS does not extend to Wholly Dependent Partners (WDP) under the MRCA.

The payable ISS rate is then determined by comparing the increased ISS ceiling rate with the rates payable under the adjusted income and assets tests, with the lowest rate being payable. In addition, the increased ISS ceiling rate cannot exceed the maximum rate of single service pension.

Only limitations on war widow's/widower's pension are included when calculating the new ceiling rate.  Limitations on orphan's pensions are not included.

Where a lump sum compensation amount is received and results in an offset against disability compensation payment , there is no legislative provision to allow an equivalent reduction in a person's assessable asset value for income support supplement purposes.  The continuing compensation offset amount is intended to represent the fortnightly return that the pensioner could reasonably expect to receive by investing the lump sum payment.