Incapacity claims post 1 July 2026

Introduction

This content is relevant to claims for incapacity payment from 1 July 2026 from persons who were previously only covered by the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) and/or Veterans’ Entitlements Act 1986 (VEA). It clarifies the policy for claims for incapacity payments under the Military Rehabilitation and Compensation Act 2004 (MRCA) following the commencement of the Veterans' Entitlements, Treatment and Support (Simplification and Harmonisation) Act 2025 (VETS Act) on 1 July 2026, in circumstances where the person was either only eligible under the DRCA or not eligible for incapacity payments under either the MRCA or the DRCA previously. 

There has been no change to the calculation of incapacity payments under the MRCA and to the payments being made to those who are already receiving incapacity payments under the MRCA. The existing policy relating to the investigation, determination and calculation of incapacity payments under the MRCA should continue to be used.

1. ‘Incapacity’ under DRCA vs MRCA 

The definition of ‘Incapacity’ is slightly different under the MRCA compared with the DRCA. Please see chapter 1.2 of the incapacity policy manual for further discussion of the definitions. 

From 1 July 2026 all new incapacity claims must be determined under the MRCA regardless of the person’s service or the Act under which the person’s injury or disease was originally accepted, meaning for incapacity payments to be payable the person must be ‘incapacitated’ based on the definition under the MRCA.

Those persons who were in receipt of DRCA incapacity payments on 30 June 2026 were transferred to MRCA incapacity payments through section 92 of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 (MRCA CaTP) without the need to claim or for the delegate to consider their entitlement to payments under the MRCA. This did not require an assessment of their eligibility against the MRCA definition of incapacity, they were assumed to be entitled.

2. New claims from 1 July 2026

From 1 July 2026 all incapacity claims, including any outstanding claims on 30 June 2026, will need to be investigated and determined under the MRCA. This includes periods from 1 July 2026 and periods prior to 1 July 2026. All periods of incapacity, where the person has not already received the equivalent compensation under the DRCA or VEA, must be investigated and paid under the MRCA. No claims can be determined under the DRCA from 1 July 2026. The person’s service or the Act under which the person’s injury or disease was originally accepted are no longer relevant and anyone with an accepted condition will be eligible to claim for MRCA incapacity payments for a period from 1 July 2026 ongoing; however, there are limits to claims for retrospective periods before 1 July 2026 as outlined below under part 3. Conditions are taken to have been accepted under the MRCA from 1 July 2026 by way of section 24A (because they were accepted under the old DRCA or the old VEA).

3. New claims with retrospective aspect

The basic principle is that a person who was entitled to claim for incapacity payments for a period before 1 July 2026 will be entitled to claim for incapacity payments for that period after 1 July 2026. Where a person was not entitled to claim for incapacity payments prior to the establishment of the MRCA as the single ongoing Act on 1 July 2026, they are not entitled to claim for a period of incapacity before this date. Section 12(2) of the MRCA CaTP provides that a person cannot receive incapacity payments under the MRCA if they have already received compensation for that period for that incapacity under the DRCA or the VEA for a period before 1 July 2026.

3.1 VEA only conditions prior to 1 July 2026

If the person previously only had VEA conditions accepted for which they were receiving a Disability Compensation Payment (DCP), then they are prevented from receiving any incapacity payment prior to 1 July 2026, as they did not have the eligibility prior to the application of the VETS Act. From 1 July 2026 ongoing they may receive incapacity payments; however, if they receive DCP at above general rate then an offset will apply.

The VEA loss of earnings allowance has not been transferred to the MRCA as this is similar to incapacity payments. The VEA loss of earnings allowance remained claimable up to 30 June 2026. Where a person has received loss of earnings allowance for a period, they are prevented from receiving incapacity payments under the MRCA for that period.  

3.2 DRCA only or DRCA and VEA conditions prior to 1 July 2026

Where a person had DRCA service and conditions, or dual eligibility under the DRCA and VEA prior to 1 July 2026 they can receive compensation under the MRCA for periods prior to 1 July 2026 for those previous DRCA accepted conditions, where compensation has not already been paid. Any new periods of incapacity claimed after 1 July 2026 for a period before 1 July 2026 will be investigated and determined under the MRCA.

3.3 MRCA and VEA conditions prior to 1 July 2026

Where a person has conditions accepted under the VEA and the MRCA there is no change to their eligibility to MRCA incapacity payments for a period prior to 1 July 2026. They continue to be entitled to MRCA incapacity payments for any incapacity resulting from their MRCA conditions; however, they cannot claim for incapacity payments for a period of incapacity before 1 July 2026 related to their VEA accepted condition alone. From 1 July 2026 onwards they can claim incapacity payments for an incapacity resulting from any of their accepted conditions. 

3.4 DRCA – nil entitlement due to superannuation offsetting

DRCA incapacity recipients who have previously had their entitlement reduced to nil under the DRCA due to the offset of superannuation combined with the end of the 45-week period may be eligible for incapacity payments under the MRCA, but from 1 July 2026 only.

A person who has previously had their incapacity determined as nil under the DRCA due to the offset of superannuation combined with the end of the 45-week period, for the period up to 30 June 2026 has received their entitlement under the DRCA despite the result being nil amount payable. 

4. Above General Rate (AGR) of Disability Compensation Payment (DCP) under VEA and entitlement to MRCA incapacity payments from 1 July 2026

From 1 July 2026 the DCP paid under the VEA will continue to be paid and indexed as normal under grandparenting arrangements. Any outstanding claims for liability or applications for increase made before 1 July 2026 will continue to be determined and may result in a person receiving an increased rate of DCP after 1 July 2026. No new claims for DCP can be submitted after 1 July 2026. 

The DCP is paid at the general rate, in multiples of 10 percent (10%) up to 100%, and the above general rate (AGR).

The AGR of DCP includes:

• Special Rate (TPI) 

• Temporary Special Rate (TTI) 

• Intermediate Rate (INT) 

• Extreme Disablement Adjustment (EDA) 

From 1 July 2026 people who are eligible for the AGR rates of DCP will also be eligible to claim for MRCA incapacity payments, some for the first time. This policy applies to prospective periods from 1 July 2026 and does not apply retrospectively to periods before 1 July 2026. However, offsetting will apply to the AGR portion of DCP where a person also receives MRCA incapacity payments, see Changes to Offsetting Arrangements from 1 July 2026 | CLIK. 

4.1 Special (including Temporary) and Intermediate Rate recipients

For MRCA incapacity payment purposes, where a person who is Special, Temporary Special or Intermediate Rate eligible, makes a claim for incapacity payments under the MRCA, no medical evidence to support their incapacity is required. Instead, the previous evidence that established their limited/nil capacity to undertake work due to their VEA accepted conditions alone will be accepted to support their incapacity under the MRCA. This is because from 1 July 2026, those previous VEA conditions are now MRCA conditions, so it is reasonable for DVA to continue to consider that those restrictions to employment remain. 

4.2 EDA recipients

As the EDA does not have a work capacity assessment as part of the eligibility criteria there will be no entitlement to incapacity payments without medical evidence. Instead, an EDA eligible person may be entitled to incapacity payments where medical evidence establishes an incapacity for work. Offsetting will apply where the MRCA incapacity payments are being paid for the same incapacity as the EDA.

5. Maximum Rate Period (45 weeks)

The basic principle for the maximum rate period following the commencement of the MRCA as the single ongoing Act from 1 July 2026 is that a person is still only entitled to a single, cumulative maximum rate period for the same incapacity. As a person does not receive a new incapacity payment each time a new condition contributes to the incapacity, the concept is similar in that they do not receive a new 45 weeks for each incapacitating condition. Prior to 1 July 2026, a person could not receive incapacity payments under the MRCA for the same incapacity as they received incapacity payments under the DRCA. From 1 July 2026 this has changed. Section 24A of the MRCA means that any injury or disease accepted under the old DRCA is now a service injury or disease under the MRCA. This means that a person may now receive incapacity payments under the MRCA for the same condition(s) for which they have previously received incapacity payments under the DRCA. It also means that any period they have not received compensation under the DRCA will be claimed and determined under the MRCA, including retrospective periods before 1 July 2026. The important consideration with the maximum rate period is whether the incapacity that is being compensated is the same incapacity regardless of the Act that applied to any periods already paid. If this is the case, then it is treated as a single period for the purposes of the maximum rate weeks.

Following the transition from DRCA to MRCA incapacity payments, a person is not provided a new period of 45 weeks. Whether a person was an automatic transition or has previously been in receipt of DRCA incapacity payments and lodges a new claim post 1 July 2026, any portion of the persons 45 weeks previously accessed will continue to be counted towards the maximum rate period under the MRCA for payments from 1 July 2026 ongoing.

However, this does not override the long-standing principle that the maximum rate period starts from the first date of entitlement for that incapacity. Where a delegate has determined a retrospective period of incapacity entitlement under the MRCA for a period before all periods already paid, including the DRCA, the maximum rate period is reset to the start of the entitlement. This may mean that where a retrospective period of incapacity is determined under the MRCA, the maximum rate period will commence under the MRCA period rather than the DRCA period previously paid, and will require a recalculation of the DRCA entitlement to apply the adjustment percentage to either some or all of that previous period of entitlement. 

Any period of incapacity payment made under the DRCA will count towards the maximum rate weeks for MRCA purposes, regardless of whether the person was still serving at the time. If a person who is still a member of the Australian Defence Force (ADF) is transferred to the MRCA or claims for incapacity payments after 1 July 2026, their payments will be calculated under Part 3 of Chapter 4 which relates to members of the ADF. Part 3 does not have provisions relevant to maximum rate weeks or adjustment percentages and therefore the person will receive payments based on 100% of their Normal Earnings. Once that person discharges from all forms of ADF service, their payments will be calculated under Part 4 of Chapter 4. When this occurs, any period of entitlement paid under the DRCA will count towards their maximum rate weeks for the purposes of section 129. If they have exceeded their maximum rate weeks under the MRCA, their payments must be calculated under section 131.