Injury Compensation Payments impact Centrelink Benefits

Injury Compensation Payments impact Centrelink Benefits

by Christine Hopper

Any Injury Compensation Payments you receive could impact your Centrelink Benefits.

Centrelink, DVA and Medicare can require you to pay back their costs as part of your personal injury claim. The Compensation Recovery Team at Centrelink can help calculate the actual impact on your personal situation.

Why Injury Compensation Payments impact Centrelink Benefits?

Remember that Centrelink administer the Social Security laws to provide a basic level of income to residents with limited financial resources. Hence the Centrelink benefits are means tested to ensure that only residents in constrained financial circumstances receive taxpayer support.

Immediately after you had a mishap you or your family on your behalf, might apply to Centrelink for NewStart or DSP because your income from work had stopped but your bills keep coming. You might then be in very constrained financial circumstances.

A claim for compensation could be lodged once your injuries have stabilized and your rehabilitation program has shown your new permanent level of physical and intellectual capacity.

Your compensation claim could include your potential loss of earnings, your potential medical costs and any costs for long term care. Your actual medical expenses, care costs and lost earnings up to the date of your compensation claim would be included in your claim amount. You might also be claiming for ‘pain and suffering’ as a result of your accident.

Much later your compensation claim would be settled. You might receive a substantial payment as compensation for loss of future earnings and/or potential long term care and additional medical costs. With this amount of ‘financial assets’ you might no longer be eligible for any Centrelink income support benefits such as NewStart or DSP.

But the compensation would be calculated effective from the date of your accident so Centrelink would backdate your means test assessment for NewStart or DSP. Thus Centrelink could conclude that you were overpaid. Hence Centrelink must by law recoup that over-payment.

Similarly, if you had become a permanent resident of a Commonwealth regulated aged care facility, your initial rate of means tested daily fees might have been too low. Once your compensation claim is settled, Centrelink could recalculate your daily Income Tested Fee and your Accommodation Charge or Supported Resident status based on your position after your compensation claim was agreed. The recalculation would be backdated to the day you entered permanent residential aged care.

In summary, if you become entitled to a substantial payment as compensation for some mishap in life then Centrelink must reassess your means tested benefits and aged care fees as if you had received your compensation settlement on the same day as you had your mishap, accident or onset of the illness.

Which Injury Compensation Payments impact Centrelink Benefits?

At Centrelink, ‘compensation payments’ include any payments for personal injury, illness, or disease that replaces lost income or earning capacity.
This Centrelink definition includes both one-off lump sums and periodic payments. Centrelink count payments within Australia and payments sourced from outside of Australia such as ‘damages claims’ for accidents that occurred whilst travelling overseas.

Compensation could result from a work-related illness, injuries from a car accident, injuries caused by slips and trips, or any other injury or illness that is due to the negligence or fault of another person.
Centrelink income support benefits are intended only for people without other financial resources. Therefore any payments that you receive as ‘sick leave’ from an employer or from a sickness or accident insurance policy are also counted as ‘compensation payments’.

Centrelink still count the sickness or accident insurance policy payments irrespective of who paid the insurance policy premiums. Your sickness or accident insurance policy could be provided directly by your employer, by your superannuation fund or by yourself using your own after-tax money for premiums.

How do Injury Compensation Payments impact Centrelink Income Support Benefits?

Compensation payments in respect of injuries resulting in total and permanent incapacity for work could comprise several significant components. As part of preparing your compensation claim, your lawyers should contact the Centrelink Compensation Recovery team and Medicare to discover how much is likely to be recouped from your compensation lump sum to cover Centrelink Income Support and Medical costs paid up to the date of settlement of your claim.

The Centrelink Compensation Recovery team provides an advisory service for the possible impacts on your Centrelink payments should you receive a compensation payment. For less complex cases, the Centrelink Online Compensation Estimator could help you work out how a proposed lump-sum and/or continuing compensation payments may affect your Centrelink payments.

In the case of short term incapacity where the compensation payments have a component for ‘loss of earnings’ for the period away from work then Centrelink could count the ‘loss of earnings’ as part of your ‘income’ for that period. The average rate of compensation for ‘loss of earnings’ could be more than the cut-off income for NewStart benefits resulting in Centrelink reclaiming all of the NewStart payments made.

If you have a sickness or accident insurance policy that pays 70% of your agreed ‘salary’ after you have been incapacitated for 30 days then Centrelink could count your insurance payments as part of your ‘income’. You would be unlikely to qualify for NewStart benefits whilst receiving regular payments under your sickness or accident insurance policy.

But if for at least the next two years, you are expected to be totally incapacitated for working fifteen hours per week then you could apply to Centrelink for the Disability Support Pension, DSP. Any payments that you received under a sickness or accident insurance policy would count as ‘income’ for the DSP Income Test.

You must inform Centrelink of your compensation payments so that your social security benefit entitlements can be assessed correctly. The Centrelink form ‘Compensation and damages form (MOD C)’ covers the items that Centrelink needs to start a review of your benefit entitlement.
If you think that Centrelink have made a mistake about your compensation payments you can ask for a review. Read about Centrelink reviews and appeals.

Injury Compensation Payments impact Centrelink Blind Pensions

Permanently ‘blind’ residents are entitled to receive the full rate of Disability Support Pension or Age Pension without any financial means testing. But if you become ‘blind’ as a result of work-related illness, injuries from a car accident, or any other injury or illness that is due to the negligence or fault of another person then Centrelink could defer starting your blind pension on account of your compensation payment.

At Centrelink, ‘compensation payments’ include any payments for personal injury, illness, or disease that replaces lost income or earning capacity. Thus Centrelink could defer starting your DSP Blind for a period equivalent to the period that you have received compensation for loss of earnings.

Injury Compensation Payments impact Centrelink means tested Age Care costs

The Commonwealth subsides the care costs of residents in Commonwealth regulated aged care facilities. Part of these care costs are recouped form the residents via the daily Income Tested Fees of residents who have more ‘income’ than a full Age Pensioner could have.

The Commonwealth also subsides the accommodation costs of Respite Care residents and Supported Residents in Commonwealth regulated aged care facilities. New Supported Residents are people who have net assets of less than $116,000 on entry to permanent residential care.

A person who was seriously injured in an accident might need to enter permanent residential aged care long before their accident compensation claim is settled. The injured person might have few assets and only Centrelink benefits for income at the time of entering permanent residential care. As a consequence, the Commonwealth could be paying the full Accommodation Subsidy for a Supported Resident and not levying any Income Tested Fee.

When the accident compensation claim is settled the Commonwealth via Centrelink, could be seeking to recoup the Accommodation Subsidy and backdate the commencement date for charging the Income Tested Fee.

Any regular payments under a sickness or accident insurance policy would be counted as ‘income’ for Centrelink purposes and included in the assessable income for the Income Tested Fee immediately on entry to permanent residential care.

Christine at Financial Care Services is experienced with the maze of aged care fees and Accommodation charges. A consultation with Financial Care Services helps you understand your potential aged care costs and Centrelink income support pensions.
Call Christine on 03 9808 0338 to make an appointment for a consultation.

Because Injury Compensation Payments impact Centrelink Benefits, you must tell Centrelink about your compensation.

Your lawyer could be interacting with Centrelink as part of quantifying your damages claim. Once you receive any compensation lump sum or start receiving periodic payments from a compensation damages settlement, or sickness or accident insurance policy, you must keep Centrelink informed about your payments.

Use the Centrelink form for compensation claim settlement payments or the regular Centrelink change of financial position system for when your insured benefits rate is varied or stops.

Help is available. Christine at Financial Care Services is experienced with Centrelink Applications and the many Centrelink financial means tests.

Financial Care Services is licensed to offer investment strategy advice and to assist you to invest any compensation payments to provide you with regular income.
Financial Care Services charges fees based on the work involved in advising you and arranging your investments. Financial Care Services does not base fees on the value of your assets nor do we accept any  payments from other service providers.

Christine could assist you with collating your personal data, estimating how much Centrelink Pension you could expect to receive and completing the Centrelink forms for you to sign. Normal hourly rate consultation fees apply for assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you.

To make an appointment for confidential, independent and professional advice about disability retirement lifestyle or financial issues please contact Christine Hopper 03 9808 0338.

Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations.

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To make an appointment for professional advice, call Financial Care Services 03 9808 0338