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9.11.5 Incapacity Benefits and Self Employment

Last amended 
6 October 2023

Incapacity payments are economic loss compensation payments due to the inability (or reduced ability) to work, because of a service injury or disease.  The DRCA and MRCA provide this compensation as regular payments calculated on a weekly basis and paid fortnightly.

Deeming a client 'able to earn' when considering self employment

Deeming a client 'able to earn' is the process which may follow once a person has successfully achieved the vocational goals of their rehabilitation program.  This process applies irrespective of the type of employment being considered by a person, self employment or paid employment.

Once the vocational goals of a client's rehabilitation plan are determined as being successfully achieved the client may be deemed as being 'able to earn' and their incapacity payments may cease or be adjusted in line with their newly demonstrated earning or work capacity.

The timing of deeming a client undertaking self employment should be based on individual client circumstances, having regard to the following:

  • the client's rehabilitation progress and recommendation received from the rehabilitation service provider and the client's treating medical practitioner;
  • feedback provided from a business mentor; and
  • income that the client's business is able to generate.

Delegates seeking more information regarding deeming should refer to section 2.7 of this manual or section 6.3.19 of the MRCA manual.

Redemption when considering self employment

Important note: When a Rehabilitation Coordinator is considering this redemption pathway for a client, the Rehabilitation Coordination must consult the client's Incapacity Delegate before any discussions on this subject are raised with the client.

Section 30 of the DRCA and section 138 of the MRCA provides that the delegate may redeem a client's incapacity entitlement as a lump sum where:

  • the client has an entitlement to receive incapacity benefits;
  • the amount of the incapacity benefits falls below an amount as prescribed; and
  • the delegate is satisfied that the degree of the client's incapacity is unlikely to change.

Section 137 of DRCA allows an incapacity payment recipient to request a redemption, where they meet the above circumstances.

A lump sum redemption in accordance with section 30 or section 137 of the DRCA or section 138 of MRCA may provide the capital to fund a self employment venture where the client is in receipt of incapacity payments at or below the prescribe amount.

In circumstances where a client is receiving incapacity payments above the prescribed amount, the delegate may consider the redemption pathway if they are able to determine an ability to earn, that would result in reducing their level of incapacity payments to the prescribed amount.  To do this accurately and fairly, delegates could base the client's ability to earn on what it would cost to replace the client for a specified time in their specific role in the business venture.

This pathway should only be considered after careful consideration of all the individual circumstances including:

  • that the degree of the client's incapacity is unlikely to change;
  • that this activity is likely to result in sustainable employment and is not likely to adversely effect the client's level of incapacity; and
  • the likely success of the business enterprise.

Delegates seeking more information about redemption should refer to section 6.4.3 of the MRCA manual.

Under the VVRS, there are no provisions for redeeming any or part pension payments.