Assessment of Periodic Compensation Payment

Portion of periodic compensation for recovery purposes

The full amount of periodic compensation is assessable for compensation recovery purposes, as periodic payments are generally made for economic loss only.

Periodic payments paid as a lump sum for a specific period

If a person's entitlement to periodic compensation payments is converted to a lump sum payment under State or Territory law, the lump sum is taken to received as periodic compensation payments for the set period covered by the lump sum. It is not considered to be a lump sum compensation payment, therefore do not calculate a preclusion period. Assess the amount of periodic compensation that a person is taken to have received in each fortnight of the compensation period as follows:    

lump sum amount ÷ number of whole fortnights in the period

Periodic payments paid as a lump sum for an unspecified period

If a person's entitlement to periodic compensation payments is paid as a lump sum, and the period to which the payment of periodic payments as a lump sum is not specified, the payment is treated as a lump sum and a preclusion period is calculated..    

Calculating impact of periodic payments on CAP and reviews

For the person receiving a CAP and compensation, reduce their pension by $1 for every $1 of the gross amount of compensation paid, after applying the income test for any ordinary income received and the assets test as usual. This assessment will be recorded in PIPS as a manual rates case, access this link for the procedures.    

Note: Periodic payments are made for wholly for economic loss, the total amount is taken into account for compensation recovery purposes.

Example of CAP reduced by periodic payments

The person is not a member of a couple and the rates and free areas used are based on rates as at 20/09/06 and are used for illustrative purposes only:

• maximum rate of pension is $512.10 per fortnight,
• gross compensation payment is $387.90 per fortnight,
• ordinary income is $90 per fortnight,
• ordinary/adjusted income free area is $128 per fortnight,
• ordinary income of $90 is below the ordinary income free area threshold of $128,
• maximum pension of $512.10 less compensation of $387.90 = $124.20, and
• rate of pension payable after compensation recovered = $124.20 per fortnight.

Example of CAP reduced by periodic payments and ordinary income

The person is not a member of a couple and the rates and free areas used are based on rates as at 20/09/06 and are used for illustrative purposes only:

• maximum rate of pension is $512.10 per fortnight,
• gross compensation payment is $387.90 per fortnight,
• ordinary income is $200 per fortnight,
• ordinary income free area (OIFA) is $128 per fortnight,
• income test applied – ordinary income of $200 less OIFA $128 = $72 x 0.4 = $28.80 affecting income per fortnight,
• maximum pension of $512.10 less affecting income of $28.80 = $483.30 reduced rate pension,
• reduced rate pension of $483.30 less compensation of $387.90 = $95.40, and
• rate of pension payable after income test and compensation recovered = $95.40 per fortnight.

Example of non-CAP reduced by periodic payments

The person is not a member of a couple and the rates and free areas used are based on rates as at 20/09/06 and are used for illustrative purposes only:

• maximum rate of pension is $512.10 per fortnight,
• gross compensation payment is $387.90 per fortnight,
• ordinary income is $90 per fortnight,
• ordinary income of $90 plus compensation payment of $387.90 gives total ordinary income of $477.90 per fortnight
• ordinary income free area (OIFA) is $128 per fortnight,
• income test applied – ordinary income of $477.90 less OIFA $128 = $349.90 x 0.4 = $139.96 affecting income per fortnight,
• maximum pension of $512.10 less affecting income of $139.96 = $372.14 reduced rate pension.

Compensation recipient not in receipt of CAP

If a compensation recipient is:

• over pension age and not in receipt of a CAP or
• DVA cannot determine whether the compensation recipient is qualified to receive a CAP from Centrelink, (for example Newstart or DSP)

the compensation recovery provisions do not apply.    

Include the compensation payments of the compensation recipient as ordinary income in the  calculation of their partner's income support pension rate.

Compensation as ordinary income for partner in receipt of CAP

If compensation is treated as ordinary income then the normal income and asset test rules apply.    

For example where a war widow/widower applies for ISS and declares a partner, the partner's income and assets are also taken into account in the assessment of ISS. If the partner has periodic compensation payments and is not in receipt of a CAP, then the periodic compensation payments are regarded as ordinary income in the ISS assessment. Record in PIPS, the total amount of the fortnightly periodic compensation payments as income plus any other sources of income and assets of both the war widow/widower and their partner. When the partner indicator is selected PIPS will automatically halve the income and assets to calculate the rate of ISS.

Effect of notional assessment after compensation offsetting on payment of rent assistance

If a person receiving a disability pension has a notional assessment due to payment of compensation or damages and their amount of disability pension is reduced, they may be eligible to receive rent assistance or an increased rate of rent assistance. In these cases, it is the reduced rate of disability pension that is used in calculating the person's rate of rent assistance, not the rate prior to reduction.