Treatment of compensation payments 108-03190000

In general terms, the compensation provisions have the following effect:

• A person who is able to claim compensation, but who does not do so, cannot be paid
• Lump sum compensation amounts may preclude payment for a period determined by the size of the lump sum. This is referred to as the compensation lump sum preclusion period. Lump sum compensation payments are considered an asset
• Periodic compensation payments are deducted from the CAP as either a direct deduction (i.e. dollar for dollar) or as other ordinary income
• Compensation payments that are subject to preclusion or direct deduction assessments are not counted as employment income or other ordinary income. Compensation payments that are not subject to these arrangements are treated as other ordinary income

Different rules apply to ABSTUDY for the treatment of compensation payments.

Income from compensation is never treated as employment income. When income from compensation is treated as other ordinary income, it is used in calculating the accrual of Working Credits. The customer is unable to deplete their Working Credit balance to offset compensation income.

Different rules apply to Status Resolution Support Services (SRSS) payments for the treatment of compensation payments.

All SRSS cases should be referred to the SRSS Level 1 Helpdesk, who will then liaise with the Department of Home Affairs policy area to determine how a customer's SRSS payment will be affected. As the SRSS payment is an administrative payment and not paid under Social Security Law, normal processes around compensation do not apply to SRSS customers.

People receiving Safety, Rehabilitation and Compensation (Defence-Related Claims) Act 1988 (DRCA) or Military Rehabilitation and Compensation Act 2004 (MRCA) payments may be eligible to receive income support payments under the Social Security Act. Payments under DRCA or MRCA that contain an economic loss component (including incapacity payments but not Special Rate Disability Pension (SRDP)) are compensation as defined under the Social Security Act, section 17.

MRCA compensation for Wholly Dependent Partners (WDP), eligible young persons and dependents, which is paid as a lump sum, are not assessed as income for social security income tests purposes.