Last amended: 5 March 2013

Compensation affected pensions (CAP)

The following DVA income support payments may be affected by the compensation recovery provisions in Part IIIC:

• invalidity service pension, granted on or after 1 May 1987
• partner service pension, granted on or after 1 May 1987
• carer service pension (saved cases), granted on or after 1 January 1993
• [glossary:income support supplement:] [glossary:(:][glossary:ISS:][glossary:):], granted on or after 20 March 1995, including people who were subject to Centrelink's compensation recovery provisions and transferred to DVA ISS.

Payments that are affected by compensation are called compensation affected pensions [glossary:(:]CAP[glossary:):].

Components of a compensation affected pension

A compensation affected pension (CAP) includes those regular components that make up the rate of payment based on the Rate Calculator. This includes pension supplement, energy supplement and rent assistance. Irregular payments not going towards the calculation of the rate of service pension (eg education entry payment) are not part of the CAP calculation.

Compensation recipient must be under pension age/qualifying age

The income support payments listed above are only CAPs where the compensation recipient is under pension age or qualifying age in the case of ISS. Once a person turns pension age/qualifying age, the income support payment is no longer a CAP and the compensation recovery rules cease to apply.

The rationale for excluding persons above pension age/qualifying age is that the person may have ceased to be a member of the workforce. It is therefore unlikely that a compensation settlement will include a component for lost capacity to earn. However, it should be noted that social security age pensions can be CAPs under the SSA compensation recovery provisions.

What happens when pension age is reached?

The compensation recovery rules no longer apply when a person reaches pension age/qualifying age and is no longer receiving a CAP. Once pension age/qualifying age is reached, the normal income test rules apply to compensation payments received.

When a person's compensation is reduced or cancelled by an insurer in recognition of the person also receiving a VEA payment, the Part IIIC compensation recovery rules require that recovery is to proceed as if the full amount of compensation payment (before the offset is applied) is received. However, there is no equivalent provision within the income test rules that apply on the person attaining pension age. The amount by which the compensation payment is offset is not received by the pensioner, and so does not meet the definition of income. The income test is limited to the actual compensation amount received by the pensioner.

Savings provisions

The compensation recovery provisions will only apply if:

• the CAP is claimed on or after 1 May 1987, and
• the compensation payment is received on or after 1 January 1995.

Event that gives rise to a person's entitlement to compensation

An event that gives rise to a person's entitlement to compensation for a disease, injury or condition is:

• the accident if the disease, injury or condition was caused by an accident, or

• in any other case, the disease, injury or condition first becoming apparent.

The event is not the decision or settlement under which the compensation is payable.

Effect of compensation recovery provisions on concessions

If a CAP is reduced to nil by a periodic compensation payment or a lump sum preclusion period applies, the person is not entitled to:

• a Pensioner Concession Card (PCC) and associated benefits*, or
• treatment at departmental expense (unless the person has some other entitlement to treatment).

*This does not apply to people who received a reinstated PCC because their income support pension was cancelled on 1 January 2017 due to changes to the assets test. There is no requirement for people in this category to be receiving an income support pension.

Effect of compensation recovery provision on blind pensioners

Blind pensioners are paid income support pension free of the income and assets tests. This exemption does not extend to the Part IIIC compensation recovery provisions. A blind service pensioner or ISS recipient may be affected by the Part IIIC compensation recovery provisions if the person is:

• under pension age (or qualifying age in the case of ISS), and
• receiving a CAP, and
• receiving or is entitled to receive compensation that is paid wholly or partly in respect of economic loss.

Compensation assessable when not received

If a State or Territory law includes a provision to the effect that a person's compensation may be reduced or cancelled if the person is eligible to receive payments under the VEA, Part IIIC compensation recovery provisions will apply as if the full amount of compensation is received. The full amount of compensation is also assessed where a compensation payment payable under an agreement has been reduced or cancelled because the person is eligible for payments under the VEA.