B21/1995 Amendment to B05/95

DATE OF ISSUE:   28 MARCH 1995

Amendment to B05/95

NOTE:  Policy information in this DI has now been superseded by material in the GOSP.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 the Compensation Recovery chapter of the GOSP for all policy information.

This Departmental Instruction is an amendment to B05/95.  The following amendments have been made to B05/95 on 'The General'.

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:

·granted 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.

11.New grants of Service Pension 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: