What does a Disability Compensation Payment compensate for?
A Disability Compensation Payment is compensation for incapacity from a condition or conditions that have been accepted under the VEA as being related to a veteran's eligible service. Disability Compensation Payments are paid in respect of incapacity, not for the underlying disease or injury. Above General Rate (AGR) Disability Compensation Payments (special rate, temporary special rate, intermediate rate) are paid for the incapacity from conditions, as well as the impact on the veteran's ability to earn their normal income.
Differing medical diagnosis for the same incapacity
If a veteran receives an award of compensation or damages from another source for the same incapacity, or any other injury or disease, that the Disability Compensation Payment is paid for, there must be a corresponding reduction or offset to the amount of Disability Compensation Payment, to prevent double compensation. There are also situations where compensation may be paid for a condition that is labelled differently, but has the same incapacity as the condition accepted under the VEA. In circumstances such as this, the incapacity that it being compensated is the critical issue. If both payments of compensation are for the same incapacity, then the offsetting provisions will apply.
In addition, if an already accepted condition is aggravated in a later unrelated event and lump sum compensation is paid from another source for the same incapacity, offsetting will still apply. Although this is not related to the initial injury, because the compensation is paid for the same incapacity, the offsetting provisions are relevant. In most cases where a lump sum is received, compensation offsetting will affect a Disability Compensation Payment for life.
Effect of compensation lump sum payments
When a lump sum is received for the same incapacity, a fortnightly equivalent offset is calculated. The fortnightly equivalent pension calculated from a lump sum is deemed to start from the same time as a Disability Compensation Payment under the VEA. Future payments of Disability Compensation Payments are reduced and retrospectively some or all of the Disability Compensation Payment 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.
Effect of periodic compensation payments
If other compensation is paid on a regular basis (for example, weekly or fortnightly), Disability Compensation Payment is offset on a dollar for dollar basis by the amount of periodic payment paid in respect of the same incapacity. Disability Compensation Payments cannot be reduced to below zero, so if the other compensation is more than the Disability Compensation Payment, then there is simply no Disability Compensation Payment payable.
Above General Rate (AGR) Disability Compensation Payments
Special rate, temporary special rate and intermediate rate Disability Compensation Payments include a notional component to compensate a veteran being incapacitated for work due to their accepted conditions. Once an AGR Disability Compensation Payment has been granted a person cannot subsequently be compensated for their loss of earning capacity as a result of additional condition/s as they have already satisfied the criteria of being incapacitated for work at the time their AGR Disability Compensation Payment was granted. Therefore a person cannot logically receive special rate, temporary special rate or intermediate rate under the VEA for one condition, and compensation for loss of capacity to work by a different condition from another source (for example, through incapacity payments).
Where a person has dual eligibility it is important to ascertain if any incapacity payments are being received, as these are also paid in respect of loss of earnings. Incapacity payments are usually paid in respect of one condition, although several conditions may contribute to a person's incapacity to work. It is important to verify what condition first incapacitates a person for work for which economic loss compensation is paid. A person may be eligible for compensation for incapacity to work from another source for the same condition, however the AGR Disability Compensation Payment is offset accordingly.
All applications that are lodged on or after 1 July 2004, that result in the payment of special rate, temporary special rate or intermediate rate will be reduced if any lump sum permanent impairment compensation has been received under the DRCA. This situation does not require the other compensation to be for the same incapacity for offsetting to occur. Therefore this applies to lump sum compensation for any incapacity, irrespective of whether the incapacity is included in the assessment of the Disability Compensation Payment. The lump sum compensation is expressed as a fortnightly equivalent, based on instructions prepared by the Australian Government Actuary. The above pensions are offset by this fortnightly equivalent, which is adjusted at the same time as the Disability Compensation Payment and by the CPI inflation factor. The authority for this offsetting is contained in section 25A VEA.
Compensation offsetting and allowances
Veterans supplement payable to Disability Compensation Payment recipients not receiving an income support payment is not a component of Disability Compensation Payment, and is not offset.
Energy supplement payable to Disability Compensation Payment recipients is also not offset.
All applications that are lodged on or after 1 July 2004 that result in the payment of loss of earnings allowance will be reduced if any lump sum permanent impairment compensation has been received under the DRCA. This applies to lump sum compensation for any incapacity, irrespective of whether the incapacity is included in the assessment of the allowance. The same method described above in the AGR section is applied.
Compensation offsetting and veteran treatment entitlements
Under separate provisions, the Repatriation Commission may recover the cost of treatment provided through a veteran's Gold Card or White Card for an injury or disease that has been otherwise compensated. Exceptions apply for abuse cases (see 9.10.5)
Compensation offsetting and service pension
Any periodic compensation payment offset against a Disability Compensation Payment is not counted again for service pension under either the compensation recovery provisions or the income test unless there is a residual amount of periodic compensation after the Disability Compensation Payment has been offset. Any other compensation or damages may also affect service pension payments.
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 service pension 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.
Lump sum compensation payments are subject to the deeming provisions for service pension purposes if this money is invested.