Compensation payments on a pension

As Deborah has realised, there can be penalties when you receive a compensation payout.

Compensation payments on a pension

Often paid as a result of difficult circumstances, compensation payments can seem like a godsend, but, as Deborah has realised, there can be penalties.

Q. Deborah
Three years ago I lost my Mum in a tragic accident. Because of the circumstances of the accident, I have received a payout from the insurer. In "their wisdom", they have decided that even though I have been on a Disability Support Pension for over 10 years, in the three years since Mum's death I would have been capable of working for nine and a half weeks. This money has had to be repaid to Centrelink out of my settlement. This amounts to $6600. My question is: am I not entitled to earn a minimal income over a certain period whilst I'm on the pension? If the amount I have repaid was broken down to the period since her death, surely it would not breach any rules of what I am allowed to earn.

A. Provided by Centrelink
You have highlighted an important point that other people in your situation should know about. Compensation payments may affect any Centrelink income support payments which people receive.

Under social security law, Centrelink is required to apply a formula to determine how a compensation payment made for a personal injury, illness or disease will impact on a person's Centrelink payment. In short, you cannot receive Centrelink payments for a certain period of time, known as the preclusion period, and any Centrelink payments already received during the preclusion period will need to be repaid.

Centrelink offers a free compensation advisory service which can explain how a compensation payment will affect any Centrelink benefits. We encourage people to contact this advisory service before they agree to accept a compensation payment.

As with all Centrelink decisions, you have the right to ask Centrelink to review at the decision. The easiest way is to talk to the Centrelink Customer Service Adviser who made the decision. They can help explain the reasons for the decision, consider any new information and explain anything which you may not understand.





    COMMENTS

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    somers79
    14th Nov 2014
    9:56am
    I feel for this lady and agree she is getting a raw deal. Let's play fair Mr Abbott, when you go on holidays then why should we pay you your wages, your family's airfares and accomodation etc. PLEASE PLEASE PLEASE - people please think hard when the next election comes up and you can bet your pension that he will throw a few dollars around to get you vote (again) and then renig like he has on over 50 Electoral Promises he made to get into power.
    particolor
    14th Nov 2014
    10:00am
    I take it You've had enough ?
    Rob
    14th Nov 2014
    10:05am
    I'm not across the Centrelink rules but it seems to me that the correct decision has been made.

    I just find it a bit silly to blame Abbott for a rule that has more than likely been in effect for a considerable time.

    50 broken promises, do you have any facts to support that?
    particolor
    14th Nov 2014
    10:41am
    Sorry !! Make that 49 !!
    tia-maria
    14th Nov 2014
    12:15pm
    DONT EVER TRUST PM Tony Abbott again, once bitten twie show.....of this minister
    Kato
    14th Nov 2014
    1:23pm
    No I think it is 49.5 subsection 3A
    Kato
    14th Nov 2014
    1:30pm
    Or was it 1 and 49 under QUANGO
    particolor
    14th Nov 2014
    2:10pm
    Every thing He says is QUANGO in the Congo to Me ??
    buby
    17th Nov 2014
    6:52pm
    i don't trust any MP, never have. i have learnt that much. This is so wrong, her compensation shouldn't be touched at all. So NOT fair. and your right it probably wasn't due to abbotts rules perhaps it was brought earlier on, I mean when do we get told about these things. never until its in good and proper, then they hit us with the pain. Yes i would like to see monies deducted when MP, go overseas, and let them pay for their own with their own monies......bugger em!

    14th Nov 2014
    11:29am
    I don't know what this person wants she has had free money for ten years from the government and then gets more free money I'm guessing in a lump sum from some sort of compo scheme and doesn't want to pay back what she should. What about the taxpayer that had to work his arse off to help pay this person over the last ten years. Give me a break some people are just greedy.
    ursula1
    14th Nov 2014
    3:54pm
    Totally agree, i was on a dsp for a while and thank the tax payer every day, its a gift not a life style. I now work as well as volunteering which i did for the last 4 years when i was unwell to try to give back.
    Blossom
    15th Nov 2014
    10:36am
    Robo, I agree with you but unfortunately no all people are able to return to work.
    I know one lady who has curvature of the spine. Her back is so "cripped up" that some days she can barely walk. Overall her quality of life is a disaster. She can't do the shopping at all and no longer drives. She very rarely ventures out these days. She has had extensive treatment but now it has practically no beneficial effect. Fortunately it didn't get too severe before her son grew up enough to be at least partly independent.
    buby
    17th Nov 2014
    6:55pm
    Perhaps Robo her mother was insured, and on her death money was then awarded to her daughter who was on a disability. Why should she be hit.......Being on a disability is difficult enough, and for some its a real struggle. she should not have to pay anything Centerlink WHY should she! thats so wrong
    Polly Esther
    14th Nov 2014
    12:15pm
    At about the fifth sentence which starts off as 'My question is' , is where I have completely lost the plot. What is going on? Could be time to make that appointment with the shrink? er yes for myself.
    particolor
    14th Nov 2014
    7:38pm
    That's nothing !! The first time I read it as Dishonesty Support Pension !! He He !!
    Kato
    14th Nov 2014
    7:41pm
    Yes that's about then I felt the wingtips shudder
    Wstaton
    14th Nov 2014
    1:22pm
    I am disappointed in the unseemly responce by some people to this ladies predicament. Compensation is supposed to help people who are suffering extra than they would be if the incident did not happen.

    For exampleon a pension had a wall fall on them and lost a leg then this would cause extra expenses, wheelchairs alteration to a house so they can get around etc. It is despicable that Centrelink would take this as income and dock the pension which means that the person might as well not have claimed for compensation in the first place but he/she would still end up with all the extra expense. maybe not because that person would have to rely on other social benefits that would have been paid for by the compensation so ends up being paid for by the taxpayer..
    particolor
    14th Nov 2014
    2:19pm
    I'm glad someone understood it ?? Id like to know how in all that Time She would have been capable of working for 9 and a half weeks ?? And what's half a week ?? 3 and a half days ??..SHEESH ??
    Anonymous
    14th Nov 2014
    2:22pm
    If you read it properly she got compo because of something that happened to her mother not her and her great wonder is why she cannot get both the full compo and the pension and as is with a lot of people these days wants everything for nothing.
    KSS
    14th Nov 2014
    2:39pm
    Yes but in this case the compensation was for what happened to the writer's mother not for some extra physical injury to herself. Therefore the compensation amounts to a windfall lump sum putting quite a different spin on it. She doesn't have extra expenses such as you use as examples.

    It is not explicitly stated but it would appear that the repayment $6600 did not take all the compensation so this person is still 'ahead' and presumably still getting her disability pension. Centrelink should not be paying people who have their own money. From the few facts we have here, it seems she still has more money than she had before. So I can't see the problem here.
    Kato
    14th Nov 2014
    7:46pm
    Even having to repay some of the pension?
    Where is the gratitude for being able to access that resource in the first place.
    MITZY
    16th Nov 2014
    8:56am
    You say Centrelink should not be paying people who have their own money. Well this happens all the time, Centrelink is and has been paying people taxpayers' money for eons. What about all the self-funded retirees who get "part-pensions"? The law entitles them to these payments. The law allows all pensioners to earn a small amount to supplement even the "full age pension" if they receive It, albeit a small amount. If you or I come into some extra money from the sale of our parents or grandparents assets, then we are obviously effected once those assets are sold and turned into cash, reducing our pensions or possibly wiping them out altogether. I think Centrelink applies the rules as they stand and with anything to do with government pay-outs they follow them. What bugs me is that what "all" the rules are that need to be adhered to is never quite black and white. Government bodies should have some of these more obscure regulations advertised so people are aware of them.
    particolor
    16th Nov 2014
    11:28am
    And X Politician put on New Start until they Reach 70 Years of Age ( most of them wouldn't Qualify as they are Millionaires ) ! Then on to Old Age Pension !!( which they still wouldn't Qualify for)....
    Level Playing Field !!
    Not Senile Yet!
    15th Nov 2014
    2:42am
    Oh really what a pathetic lot we are!!!
    Lump sum Compensation is an Insurance payout....for whatever reason!
    As for the amount in question.....why is the Government entitled to take any of it????
    What entitles them access to it????
    Oh I see.....they believe that she was able to work for ??? weeks.....really......based on what???
    She has to repay what they already deemed she was unable to do........that is why they paid it in the first place NO?????
    Me thinks the Government is discriminating against her BECAUSE she is on a Pension....and probably it's not by her choice that she is!!!
    If they did this to you.......would you not be a bit cut????
    So you all think that because she is on a pension that justifies this decision......Blatant discrimination by all of you!!!!
    Pensions etc have a means test......if your well off you do not get one.....simple fact!
    This dip into her Compensation payout is NOT a fair chop at all....unless it took her over the means test threshold....which I doubt it did.
    Don't any of you understand that being on a Disability Benefit restricts her ability to GET work let alone PERFORM it?????
    Her compo payout or windfall is being taxed.....unjustly....at a time when she probably needs the income the most.
    Might I remind you all.....before her disability....she too paid her taxes......careful what you put upon others.....you too might reap the same rules applied to you when you are hard up!!!!
    Such harsh judgements about you may well be applied not too far in the future......shame on your point of view.....The Compo should have been treated no differently than any inheritance.....with minimal tax applied to the lump sum!
    Pensions should not be given and then taken back over such things unless they exceed the normal Means Test!
    Wstaton
    15th Nov 2014
    7:42am
    You are right, something I had not thought of. Does this mean that if a pensioner wins say $10k on tatts they would get their pension docked. Even if it didn't exceed the asset test
    particolor
    16th Nov 2014
    9:33pm
    No !! But you still have to report it to the Commandant !!..
    Blossom
    15th Nov 2014
    10:29am
    Make an appt. to see somebody at your nearest Centrelink Office.
    I did that when my Mum's pension was cut so much that it didn't even cover medications and the officer put in a written request and her pension was increased. I notice the article doesn't state how much the compensation was. If there was any victims of crime payment received I wonder if that was re-paid as is the legal requirement.
    Reeper
    16th Nov 2014
    12:40pm
    Some pretty sad people comment on this site...clearly ALP supporters who have no idea what democracy is. Your party lost the last election, it may win the next, it may not. But what is certain is that the excesses of Rudd and Gillard will still be around and will still have to be paid for. Now, as for Centrelink...the rules being discussed ARE NOT MR ABBOTT'S and have been in place for some time. Social security is a MASSIVE drag on the economy and perhaps the single most abused. There will always be people caught up in some rules intended to ensure the national purse is not pillaged by those intent on doing so....to be fair, they still do get a large share of OUR purse. Living off social security isn't fun if you aren't rorting the system. A return to an ALP government, contrary to somers79 will be with promises of huge amounts of money from whoever is the ALP leader at the time, which will still have to be paid for from everyone's pockets (except ALP and Union members who will dip into whatever funds they can get at....!)
    archer
    19th Mar 2015
    8:25pm
    You should give back the increases you recieved under Labor. Put your money where your mouth is so to speak. I work and pay tax and I would prefer pensioners to get it than have it spent on useless wars but that's just me
    Pensioners spend money and that helps the economy I am all for that.
    ozzie
    20th Nov 2014
    5:53am
    Indeed, these provisions for "offsetting" Compensation Payments have been around for some time......although it seem odd that Deborah has been "bitten" due to an event that occurred to her mother?? There is, as mentioned, a brief summary at the Human Services website :
    http://www.humanservices.gov.au/customer/services/centrelink/centrelink-compensation-recovery
    which only gives a "broad brush approach".....it is no doubt "Sir Humphrey Appelby" country in this area......does this imply that if, say, a couple had life insurance on each others life, and one passed away, they'd lose part of their pension? I would have thought this only the case IF the Insurance payment increased the Assets & was caught by the deeming provisions OR the IF the income deemed to be derived from the Insurance payment was caught by the deeming rules.

    It sounds to me.....and this is just a guess, that Debra's mother may have had some sort of Income Protection, or Weekly/Monthly Compensation policy & the Company paid the claim by way of a single lump sum, as often happens.

    It is a very convoluted area of interpretation, and I would endorse the remarks to contact the Centrelink Compensation Unit for guidance.......
    whatsupdok
    15th Nov 2015
    2:51pm
    I interested in working out if I take a lump sum out of a 401K in the USA, what happens to my Old Age Pension from Australia and what amount of tax they would take, can the tax element be averaged and would Centrelink stop or reduce my pension even if I am under the amount of assets to hold. I know they reduce it possibly on the income test. The amount would be $245,000.00 in USA. I don’t have any other assets than this?


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