Treating periodic compensation payments as a direct deduction or income 108-03190040

Periodic compensation is generally a dollar for dollar reduction against the daily rate of a Compensation Affected Payment (CAP) payable. The reduction is applied to the compensation recipient’s rate after the ordinary income and asset test has been applied.

Treat periodic compensation as a direct deduction for the recipient if on the date of incident:

• the compensation recipient is not qualified for and receiving a compensation affected payment (CAP)
• the compensation recipients payment was suspended or paid at a nil rate on the incident date

Direct Deduction means that the periodic compensation is assessed as a dollar for dollar rate reduction against the customer’s payment.

Payments assessed as direct deduction will not affect the compensation recipient’s partner's eligibility until the compensation recipient’s entitlement is reduced to nil. Any remaining compensation will affect the partner of the compensation recipient’s own ordinary income.

If the compensation recipient was qualified and receiving a CAP at the time of their incident the periodic compensation is treated as ordinary income.

Where it is not possible to determine the compensation recipient’s qualification for a CAP for reasons other than the effect of the compensation provisions, any periodic compensation paid in respect of the compensable event should be assessed under the ordinary income test.

Compensation assessed as Ordinary income will affect entitlement under the normal ordinary income provisions appropriate for the customers/partners payment type.

Compensation assessed as Ordinary income will affect a partner's entitlement under the normal ordinary income provisions.

The compensation provisions make a distinction between ‘receiving’ and ‘qualified for’ when determining the correct way to assess compensation.

Customers who were NIL rate at the time of the incident are considered to be qualified for a CAP but not in receipt of it. As a result their compensation should be assessed using the direct deduction test.

If a customer’s claim is back dated to the date of injury under section 23(2) of the Act the person is understood to be in receipt of that payment from the date of grant.

Only staff in the Compensation Recovery Team (CRT) can set up arrears and new ongoing periodic payment details. Once completed, all other staff can update periodic compensation payments on an existing record.