Injury compensation and the pension

Jack has had a worker’s compensation claim approved and wants to know how it will affect his pension payments.

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Q. Jack
In 2012 in my final part-time job, I had a fall at work and injured my left knee. It wasn’t considered serious at the time and the decision was made just ‘to keep an eye on it’. Well, now seven years later, it has become very painful and gives way unexpectedly causing a number of falls. The WorkCover Insurance agency has accepted my claim for medical expenses and weekly payments. I wasn’t expecting weekly payments, which will total about $53,000 from then until now. I am worried about how this will affect my disability support pension. Can you provide any insights?

A. It is a fundamental principle of the social security system that people who are unable to work because of a compensable injury are prevented from receiving income support from both the social security and compensation systems for the same period. These rules are designed to ensure that people who find themselves in this situation receive income support from those with the primary responsibility to provide the support i.e. statutory compensation schemes and insurers.

A compensation lump sum can preclude the compensation recipient from social security income support for periods in the past as well as into the future. 

Most periodic payments are assessed as a dollar for dollar deduction against the compensation recipient’s compensation affected payments (CAP), but in some circumstances can be treated as income.

Special provisions allow for all or part of a compensation payment, lump sum or periodic payment to be treated as if it has not been made or is not liable to be made.

If a compensation recipient receives one, or a number of compensation lump sums in respect of the same compensable event, and at least one of those lump sums contains an economic loss component, then a preclusion period must be applied. This means that although the compensation recipient would otherwise be eligible for a CAP, the compensation recipient may have to repay some of that payment for a past period and may be precluded from payment for a period into the future.

A lump sum that solely represents arrears of past periodic compensation payments is not a lump sum payment and the arrears payment is assessed as if it had been paid in the period it represents and is therefore treated as a direct deduction or ordinary income as the case may be.

A Centrelink Financial Services officer will be able to explain exactly how your payment will be treated in these circumstances. You can contact an officer by calling 13 2300.

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben

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