C21/2005 Effect of Compensation Payment on Partner's Pension

Purpose

The purpose of this instruction is to:

•       provide information concerning a change in policy relating to the effect of compensation in a partner's income support pension assessment; and
•       instruct staff to retrospectively reassess all affected cases.

Background

Where a person who is a member of a couple is receiving periodic compensation payments that are assessed under Part IIIC of the Veterans' Entitlements Act 1986 (VEA), the partner's income support pension may be affected.

Section 59TA of the VEA concerns the effect of periodic compensation payments received by a person on the rate of the compensation recipient's partner's compensation affected pension (CAP).  Section 59TA states that:

“...the amount (if any) by which the daily rate of periodic compensation payable to the person exceeds the daily rate of the compensation affected pension for which the person is eligible for a day or days in the periodic payments period is to be treated as ordinary income of the person's partner.”

This section and further changes to the treatment of compensation for economic loss paid to a person who is a member of a couple were introduced in the Veterans' Affairs Legislation Amendment (Further Budget 2000 and Other Measures) Act 2002.

Old  policy

The previous policy interpretation of section 59TA was that the compensation excess which is to be added to the partner's ordinary income is calculated as follows:

amount of periodic compensation payable to the compensation recipient minus the fortnightly income or assets reduced rate

A re-examination of section 59TA and consideration of Family and Community Services policy has led the Repatriation Commission to believe that an incorrect policy interpretation of the provision has been made.

New policy

The Repatriation Commission decided on 14 June 2005 to change the old policy. Under the new policy, the compensation excess to be added to the partner's ordinary income is to be calculated as follows:

amount of the periodic compensation payable to compensation recipient minus the maximum payment rate of the person's CAP.

The maximum payment rate includes the pension supplement but does not include any allowances.

This adjusted policy is more beneficial than the previous policy. An example of the effect of the new policy and a comparison with the previous policy is provided at attachment A.

New policy – partner in receipt of a non-CAP

Where the partner of a compensation recipient is in receipt of a pension other than a CAP, the compensation excess is calculated in the same way but is added to the couple's ordinary income.

Re-assessment of cases

As the previous interpretation of the section was incorrect, it will be necessary to review the small number of cases affected by the application of the previous policy and retrospectively reassess them.

The officer/s responsible for compensation cases from each State Office should identify all compensation cases where the recipient has/had a partner, reassess under the new policy and arrange to pay any arrears.

Contact

Please contact Kirrily Williams on (02) 6289 6525 or by email if you have any further queries.

Example

Mr Stephenson receives $575.00 per fortnight in periodic compensation.  He and Mrs Stephenson have a total of $400 of other ordinary income per fortnight and no assets.

Rate of CAP payable under new policy

Under section 59T of the VEA Mr Stephenson's invalidity service pension is reduced to nil by the compensation payments. Mrs Stephenson's partner service pension is a CAP as she is 45 years old.  The amount of CAP payable to her is calculated as follows:

Veteran

Maximum basic rate$397.70

Less compensation payments$575.00

Excess compensation                             ($177.30)

Partner

50% of combined income$200.00

Plus excess compensation$177.30

$377.30

Less ordinary income free area$108.00

Ordinary income excess$269.30

     X0.4

Reduction for income $107.72

Maximum basic rate $397.70

Less reduction for income$107.72

Income reduced rate$289.98

Rate of CAP payable under old policy

Under section 59T of the VEA Mr Stephenson's invalidity service pension is reduced to nil by the compensation payments. Mrs Stephenson's partner service pension is a CAP as she is 45 years old.  The amount of CAP payable to her is calculated as follows:

Veteran

50% of combined income$200.00

Less ordinary income free area$108.00

Ordinary income excess$  92.00

     X0.4

Reduction for income $  36.80

Maximum basic rate $397.70

Less reduction for income$  36.80

Income reduced rate$360.90

Less compensation payments$575.00

Excess compensation                             ($214.10)

Partner

50% of combined income$200.00

Plus excess compensation$214.10

$414.10

Less ordinary income free area$108.00

Ordinary income excess$306.10

     X0.4

Reduction for income $122.44

Maximum basic rate $397.70

Less reduction for income$122.44

Income reduced rate$275.26