DATE OF ISSUE: 8 MAY 1996
ASSESSMENT OF COMPENSATION PAYMENTS FOR SERVICE PENSION PURPOSES - CLARIFICATION AND INVESTIGATION OF CURRENT POLICY/LEGISLATION
The purpose of this Department Instruction (DI) is to:
clarify current Repatriation Commission policy with respect to the assessment of compensation payments (paid to a pensioner by a party other than DVA) for service pension purposes for service pensioners under service pension age ie, invalidity service pension, partner service pension and carer service pension; and
advise of the formation of a National Office Working Party charged with examining the purpose and appropriateness of current legislative and policy provisions related to the assessment of compensation payments for service pension, disability pension and health/treatment purposes.
2.Note that this DI supersedes DI's B05/95 and B25/95 with regard to the specification and application of savings dates in respect of the treatment of compensation payments for service pension purposes.
3.It is also important to note that the General Orders Service Pension chapter entitled "Compensation Recovery" should be consulted in respect of any queries regarding policy and procedural aspects of the treatment of compensation payments for service pension purposes.
Savings provisions
Background
4.Some confusion has been caused by the specification of conflicting/ambiguous savings provisions regarding the treatment of compensation payments for service pension purposes as prescribed in:
Part IIIC of the Veterans' Entitlements Act 1986 (VEA) as inserted by the Veterans' Affairs (1994-95 Budget Measures) Legislation Amendment Act (No.2), No.164 1994;
Repatriation Commission Decision No. CM4750 dated 8 March 1995;
a National Office Memorandum issued on 10 March 1995 from National Office Income Support to the State Program Managers Benefits, Managers Income Support and Managers Veterans' Advisory Network in all State Offices; and
Current provisions of Part IIIC of the VEA
5.Subsection 59M(3) of the VEA provides that the reduction of pension by one dollar for every dollar of compensation payment (in respect of lost earnings or capacity to earn) which the person receives or is entitled to only affects the following pensioners:
a)invalidity or partner service pensioners if:
the compensation is received on or after 1 January 1995; and
the claim for the pension was made on or after 1 May 1987; and
b)carer pensioners if:
the compensation is received on or after 1 January 1995; and
the claim for the pension was made on or after 1 January 1993.
(Note that the VEA also prescribes that income support supplement pensioners (ISS) in receipt of compensation payments after 1 January 1995 are also subject to the compensation recovery provisions. However, because ISS was introduced on 20 March 1995 - after the introduction of the compensation recovery provisions - there are effectively no saved ISS cases. ISS is therefore not discussed in this DI.)
6.These provisions effectively operated such that an invalidity, partner or carer pensioner was not saved from the application of the compensation recovery provisions if they were in receipt of compensation payments upon introduction of the compensation recovery provisions and had made a claim for the specific pension after the 1987 and 1993 cut-off dates - that is, the legislation was retrospective in such instances.
Commission Decision CM4750
7.It was not the intent of the Repatriation Commission that the new compensation recovery provisions be retrospective in their effect. In Commission Decision No. CM4750, the Commission sought to clarify the intent of the provisions and establish that it was intended that savings provisions did in fact apply to those pensioners in receipt of periodic payments of compensation.
8.Unfortunately the decision was worded such that it addressed only the date of receipt of periodic payments of compensation and did not address the date of claim for pension. That is the Decision only spoke in terms of stating that the compensation recovery provisions would not apply to those pensioners who commenced to receive or be entitled to periodic compensation payments prior to 1 January 1995.
9.The effect of addressing only the date of receipt of periodic payments of compensation was that pensioners who made a claim for service pension after the specific claim cut-off dates provided in Part IIIC were not in fact saved by Commission Decision CM4750. That is, the intended Commission savings policy was inoperative and the legislation remained fully functional in its provisions.
10.It should be noted that pensioners who received a lump sum compensation payment were not to benefit from the intended savings and that the provisions of Part IIIC were fully operative in such instances.
National Office Memo and DI's B5/95 and B25/95
11.The National Office Memo issued to advise of the Commission's decision was somewhat ambiguous in that it:
stated that the provisions of Part IIIC were only to apply to cases where compensation claims were settled on or after 1 January 1995;
failed to make any mention of consideration of pension claim date in assessing application of the provisions of Part IIIC; and
did not differentiate between the desired savings treatment of periodic payments and the continued treatment of lump sum payments under the new legislative provisions.
12.DI's B05/95 and B25/95 did not address or resolve these oversights.
Actual current policy for periodic payment compensation payment cases
13.The above-mentioned conflicts and ambiguities were recently brought to the attention of the Repatriation Commission. In Commission Decision No.CM4825 of 10 April 1995, the Commission clarified the intent of Decision CM4750 to mean that:
"...only persons who receive periodic payments of compensation after 1 January 1995 and who are granted pension after 1 January 1995 are affected by the legislative provisions of Part IIIC of the Veterans' Entitlements Act 1986.".
Non-saved cases
14. Therefore only persons under service pension age who receive periodic payments of compensation after 1 January 1995 and who make a claim for/are granted service pension (ie., invalidity service pension, partner service pension and carer service pension) after 1 January 1995 are to be assessed according to the new compensation recovery provisions of Part IIIC of the VEA.
Saved cases
15.Any invalidity service pensioners, partner service pensioners and carer service pensioners who were in receipt of periodic compensation payments prior to 1 January 1995 or who made a claim for/were granted their pension prior to 1 January 1995 are taken to be "saved" and should have their periodic compensation payments assessed under the ordinary income and asset test provisions for service pension purposes (as applicable to service pensioners of service pension age).
Actual current policy for lump sum compensation payment cases
16.It is important to note that Commission Decision CM4825 does not extend savings provisions to instances where invalidity service pensioners, partner service pensioners and carer service pensioners receive lump sum compensation payment. Such cases should continue to be assessed under the relevant provisions of Part IIIC of the VEA where the pensioners circumstances match the criteria specified by that Part (as noted in paragraph 5 of this DI).
Assessment of compensation payments - resolution of ongoing issues
17.In addition to advising the Commission of the need to clarify the intent of their earlier CM4750 decision, Commission was made aware that there were a number of other issues with respect to the assessment of compensation payments for the purposes of the VEA which required investigation and appropriate resolution.
18.Included amongst these issues is the treatment of compensation payments for disability pension purposes and the interaction of that treatment with the treatment of compensation payments for service pension (and ISS) purposes. The Commission was made aware that this particular issue is most complex and that the current interaction between the two pension treatments does not always lead to consistent and equitable treatment of pensioners in receipt of both types of pension and some form or forms of compensation payment.
19.Whilst this may be the most complex issue required to be resolved, Commission was also advised that some examination of the impact of compensation payments on treatment and other benefits was also warranted to ensure consistent and equitable treatment of pensioners.
20.In Decision CM4825, Commission therefore agreed that:
"a joint working party be formed comprising representatives from Income Support Branch, Compensation and Review Branch and Health Care and Services Division. The working party is to be
co-ordinated by the Legislation Section of Legal Services Branch and will prepare a report outlining possible strategies to overcome the difficulties associated with the legislation in regard to compensation, including treatment eligibility.".
21.Once the Party has presented their report, work will proceed on priority implementation of appropriate legislative and policy measures to resolve the current complexities and difficulties. However, staff should be advised that any legislative amendments made to the VEA will be subject to the usual and often lengthy timeframes which apply to the process of legislation through Parliament.
Queries
22.Any further queries in respect of the treatment of compensation payments for service pension (income support) purposes should be directed to Martin Dibb on telephone 06-2896751, fax. 06-2894854, LAN C-C-PAA-1.
23.In respect of any queries regarding the Working Party, the following are the members/contact officers comprising the Party and the areas which they represent:
Legislation & Chairperson of — Kay Rodda — ph.06-2896540
Working Party
Health/Treatment — Judith Bielleman — ph.06-2896557
Compensation (Disability — Perry Phillips — ph.06-2896483
pension)
Compensation (Service — Martin Dibb — ph.06-2896751
pension).
MURRAY HARRISON
BRANCH HEAD
INCOME SUPPORT