Compensation Offsetting Guidelines

Note for CLIK Users

From 1 July 2026, the Veterans’ Entitlements Treatment and Support (Simplification and Harmonisation) Act 2025 (VETS Act) is closing the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) and the Veterans’ Entitlements Act 1986 (VEA) to new compensation claims. Further reforms brought about by the VETS Act will change the offsetting arrangements for Disability Compensation Payment (DCP) recipients under the VEA who receive periodic incapacity payments under the Military Rehabilitation and Compensation Act 2004 (MRCA) from 1 July 2026. In addition, common law actions will be considered under the MRCA in certain circumstances, irrespective of the Act a veteran’s underlying compensation payments are paid under. 

Key Points – DCP offsetting changes

• From 1 July 2026, offsetting arrangements will change for VEA DCP recipients who receive periodic incapacity payments under the MRCA for the same incapacity, where:
  • Only the Above General Rate portion of the DCP will be offset by MRCA incapacity payments for the same incapacity,
  • The offset will not take the DCP below the underlying General Rate that corresponds with the person’s impairment and lifestyle ratings, and
  • General Rate DCP will no longer be offset by MRCA incapacity payments.
• Current DCP offsets by MRCA and DRCA incapacity payments will remain in place until 30 June 2026.

Key Points – Common law actions against a third party (other than the Commonwealth)

• From 1 July 2026, damages paid by third parties (other than the Commonwealth) are considered under the MRCA, irrespective of when the common law claim commenced,
• Veterans who recover damages from a third party (other than the Commonwealth) on or after 1 July 2026 (regardless of when their service-related condition occurred), will be subject to sections 401 and 402 of the MRCA only. However, where VEA veterans successfully recover damages for the same cause of action from 1 July 2026, the MRCA will not recover VEA medical treatment costs,
• Sections 401 and 402 of the MRCA apply to recover and bar compensation to account for third-party damages paid for the same cause of action.

Key Points – Action for damages against the Commonwealth 

• The MRCA limits damages claims against the Commonwealth to only non-economic loss,
• An action for damages against the Commonwealth after 1 July 2026 can only be instituted by veterans entitled to MRCA permanent impairment AND only for non-economic loss,
• The MRCA will reflect an updated limit on damages for non-economic loss to $177,000,
• The date a veteran commences an action for damages against the Commonwealth is key when considering the relevant Act and recovery provisions that apply:
  • All claims brought against the Commonwealth after 1 July 2026, are considered under the MRCA. This applies to everyone, including veterans exclusively covered under the DRCA and the VEA, and
  • Where a claim against the Commonwealth was instituted before 1 July 2026, the DRCA and/or VEA recovery provisions will apply, even if the damages are recovered after 1 July 2026.

Note: Additional guidance regarding the 1 July 2026 changes will be provided across the relevant CLIK chapters and sub-chapters.