The effect of compensation on Social Security payments 108-03190010

Is the compensation recipient only claiming a Low Income Health Care Card (LIC)?

• Yes,
• Compensation must be recorded in CMS for the 8-week period before the lodgement of the LIC claim
• LIC is not considered a compensation affected payment (CAP) for compensation purposes
• See Low Income Health Care Card (LIC) income test. Procedure ends here
• No, go to Step 2

If payments are:

• compensatory in nature, go to Step 3
• from sickness and accident insurance policies, go to Step 4
• from a superannuation fund, go to Step 5
• to be treated as compensation, go to Step 6

Examples of compensatory payments:

• Payments made for criminal injuries by victim compensation schemes
• Death of a relative. For example, deceased dependant payments paid to a surviving partner. See Assessment of income for Centrelink payments
• Discrimination
• Unfair dismissal
• Workplace harassment

These payments do not fall under the Social Security Law definition of 'compensation'. They are assessed as ordinary unearned income unless subject to an income test exemption. How a compensatory payment affects a social security entitlement depends on whether it is paid as a lump sum or as a periodic payment.

Lump sums that are compensatory are considered exempt lump sums. These lump sums must be coded on OIN. See Exempt Lump Sums for coding instructions.

For periodic compensatory payments, record that these payments are not compensation in a Fast Note and code the payments on the Other Income (OIN) screen.

See Recording other income on the Other Income (OIN) screen for OIN coding instructions.

Procedure ends here.

These include:

• Personal injury income protection
• Salary continuance
• Trauma insurance

Payments from sickness and accident insurance policies are ordinary income when:

• the customer paid or contributed to the premium, and
• there is no offset clause or an offset clause that is not invoked against a social security pension or benefit

Note: If the employer has made contributions to the policy and the off-set clause is invoked, treat the payments as compensation. See Step 6.

Are payments to be treated as ordinary income?

• Yes, income must be coded on OIN. See Income from personal injury insurance schemes and disability benefits
• No, payments are treated as compensation. Go to Step 6

When payments are made by a superannuation fund:

• code payments see instructions in Income from personal injury insurance schemes and disability benefits
• record that these payments are not compensation in a Fast Note
• finalise the CMS record

Note: do not send any letters auto generated by the system.

Procedure ends here.

Staff outside of compensation teams, see Role of staff outside Compensation Teams for process to follow.

Record the compensation on the Compensation Management System (CMS) in the compensation recipient's record for:

• periodic compensation, see Coding and raising debts for periodic compensation payments
• lump sum compensation, see Assessing lump sum compensation payments and calculating debts

Any periodic compensation received by the customer may be a direct deduction from the rate of their CAP. If this prevents them being paid and they have a partner, then an excess periodic compensation amount may be calculated and transferred to the partner as other ordinary income. See Effect of periodic compensation on partner's income support payment.