Compensation lump sum preclusion periods (CLK) 117-02020000

Compensation recipients cannot receive a social security Compensation Affected Payment (CAP) during a preclusion period. Customers can test their eligibility for a Centrelink payment once the preclusion period ends. The Government expects customers to use their lump sum payment to provide their income support.

For lump sums settled by consent or agreement:

• The compensation part is 50% of the gross settlement
• The only allowable deduction before applying the 50% rule is weekly compensation that has been paid

Use the specified amounts in the award to calculate the charge when the lump sums is paid by a:

• judgement after a contested hearing of a court
• tribunal or
• an independent arbitration

Calculate by dividing the economic loss by the relevant divisor applicable at the date of settlement.

Any CAPs paid to the compensation recipient during the preclusion period becomes a recoverable debt (compensation charge). This includes any supplementary payments paid with the CAP.

Current CAPs may be cancelled and future CAPs precluded if the period runs into the future.

The preclusion period will start from the:

• date of injury
• date of diagnosis
• date of economic loss or capacity to earn commenced
• day after any periodic compensation ceased or
• date periodic compensation payments are reduced to allow for a lump sum redemption of part of the future payments

A lump sum paid solely of an arrears of periodic compensation is not treated as a lump sum and is assessed in the period it represents. These payments may affect any partner's CAPs received or claimed in that period.

Some entitlements are still available during a preclusion period if the person qualifies otherwise. This includes:

• Low Income Health Care Card (LIC)
• Commonwealth Seniors Health Card (CSHC)
• Mobility Allowance (MOB)
• Family assistance payments including Family Tax Benefit (FTB)
• Child Care Subsidy (CCS)
• Carer Allowance (CA)
• Different rules apply to ABSTUDY for the treatment of compensation payments

A preclusion period does not stop the compensation recipient's partner from receiving an income support payment. The lump sum compensation payment may be assessed under the income or assets test. If the lump sum compensation payment was received prior to 20 March 1997, both the compensation recipient and their partner may be affected by the preclusion period.