Calculating the compensation part of a lump sum payment 117-02010010

Lump sum claims can settle:

• out of court by consent or
• by judgement as a result if contested hearing by a court, tribunal or arbitrator

A claimant or their legal representative can claim lump sums with components for economic loss, including loss of earnings or loss of earnings capacity.

A copy of the settlement document, judgement or claim for compensation must be obtained:

From the compensation payer about the composition of the settlement

To determine if economic loss was claimed

The Compensation Recovery Team (CRT) will then decide whether or not the payment contains economic loss.

A preclusion period and charge can be raised if the lump sum:

• contains an economic loss component, or
• settles with other economic loss lump sum payments for the same incident, or
• where the previous lump sums paid for the same incident and at least one contains an economic loss component

For compensation claims settled out of court, the compensation part is deemed to be 50% of the gross settlement where:

• the settlement contains an economic loss amount, or
• there has been more than one lump sum settlement, and one settlement contains an economic loss component. In this case all the lump sums are added together and 50% deemed on the total
• taking away only any amount of repaid periodic compensation from the gross compensation lump sum amount

Some claims will clearly relate to economic loss. In other cases, the claimant or their legal representative may assert that a given settlement has no economic loss or loss of earnings component. A copy of the settlement document and claim for compensation must be obtained and advice sought from the compensation payer about the composition of the settlement. The Compensation Recovery Team (CRT) will then decide whether or not the payment contains economic loss. If it does, the compensation part is deemed to be 50% of the gross settlement(s) regardless of what is asserted to be the actual economic loss amount.

If the lump sum compensation is paid after a contested hearing by a court, tribunal or arbitrator, the specific amounts awarded for economic loss are taken to be the compensation part of the lump sum. The economic loss amount is calculated by adding any amounts awarded for:

• past and future economic loss
• interest awarded on past economic loss
• interest on superannuation
• loss of superannuation and
• taking away any amount of periodic compensation to be repaid from the judgement

Where a claim for compensation has been determined by a judgement in a contested hearing, a copy of the judgement papers are required in order for the social security charge to be calculated. In judgements that contain no specific details about the amount awarded to the claimant any evidence including advice from the compensation payer about the amounts paid for economic loss should be taken into account when deciding the compensation part. Failing any other evidence, it is reasonable to decide that the compensation part is 50% of the gross settlement amount.

In some situations a judgement may leave earlier compensation lump sum settlement(s) in place. In these cases the CRT will need to re-decide the individual economic loss components of each payment having regard to the available evidence, that is, check the economic loss component of each compensation lump sum awarded and add up the economic loss components to arrive at the total to be used for the aggregated preclusion period.