4.13.1.50 Exemptions from the Compensation Provisions

This topic

This topic contains information on the following:

  • when is a social security payment exempt from the compensation provisions,
  • person transferred to YA or Austudy - effect on lump sum,
  • payments exempt from the compensation provisions, and
  • compensation and FTB.

Summary

Most social security income support payments are compensation affected but some exemptions apply.

When is a social security payment exempt from the compensation provision

If a person is granted an income support payment before it became compensation affected (SCAP), the person remains exempt from the compensation provisions while they remain on that payment. However, if the person loses entitlement and subsequently re-applies for that CAP, or another CAP, the exemption no longer applies and the compensation will affect the person under SSAct Part 3.14.

Examples:

  • A DSP (not blind) recipient who was granted an invalid pension prior to 1 May 1987, receives a $2 million compensation settlement. Although unaffected by the provisions of Part 3.14, the person is cancelled under the assets test. If the person reclaims they will then be subject to a preclusion period. However, income support payments made before the cancellation are NOT a compensation debt and are not recoverable.
  • A DSP (not blind) recipient who was granted an invalid pension prior to 1 May 1987, and is receiving weekly compensation payments (treated as income), is transferred to Age. Age pension is a CAP and as such will become subject to the compensation provisions and their compensation payments will be treated as a direct deduction. A DSP person who turns age pension age can elect to remain on DSP.

Act reference: SSAct section 17 Compensation recovery definitions, Part 3.14 Compensation recovery

Policy reference: SS Guide 3.6.1.10 Qualification for DSP - 30 Hour Rule, 3.6.1.12 Qualification for DSP - 15 Hour Rule

Person transferred to YA or Austudy - effect on compensation lump sum

If a person who was receiving AUSTUDY transferred to YA or Austudy on 30 June 1998 and received a lump sum compensation payment BEFORE that date, they are exempt from the LUMP SUM PRECLUSION PROVISIONS while they continue to receive YA or Austudy. The following table shows the rules that apply.

If the lump sum was received… Then…

before 20 March 1997, AND

by a person in receipt of AUSTUDY,

the person retains access to YA or Austudy under SSAct section 1184K, AND

the partner CANNOT qualify for a CAP during the preclusion period.

before 20 March 1997, AND

by the PARTNER of the person in receipt of AUSTUDY,

the compensation recipient CANNOT qualify for a CAP during the preclusion period, AND

the AUSTUDY recipient can access YA or Austudy under section 1184K.

between 20 March 1997 and 30 June 1998, AND

by the person in receipt of AUSTUDY,

the AUSTUDY recipient retains access to YA or Austudy under section 1184K, AND

the partner is NOT affected by a compensation preclusion period.

between 20 March 1997 and 30 June 1998, AND

by the PARTNER of the person in receipt of AUSTUDY,

the compensation recipient CANNOT qualify for a CAP during the preclusion period, AND

the AUSTUDY recipient is not affected by a compensation preclusion period.

on or after 1 July 1998, the normal preclusion rules apply to the compensation recipient.

This exemption from the compensation provisions does NOT apply to compensation recipients and their partners who:

  • transfer from Austudy, and
  • are receiving periodic compensation payments.

Act reference: SSAct section 1184K Secretary may disregard some payments

Payments exempt from the compensation provisions

Wife (age) pension, widow pension and BVA are exempt from the effect of the compensation provisions.

Note: From 1 July 2014, payments made under the Farm Household Support Act 2014 are treated the same as NSA and YA payments, and are considered CAPs. Prior to 1 January 2014, payments made under the Farm Household Support Act 1992 that were calculated in reference to the SSAct rates calculator, were not affected by the provisions of the SSAct Part 3.14.

If a person is in receipt of a payment that is exempt from the compensation provisions any compensation that is received is assessed as ordinary income.

Act reference: SSAct section 8(1A)(d) A payment of compensation…

Policy reference: SS Guide 4.13.1.20 Assessment of Compensatory Type Payments

Compensation & FTB

Compensation is NOT identified separately by the FTB income test. However:

  • compensation that is taxable income IS part of an individual's taxable income,
  • non-taxable compensation is NOT assessed under the FTB income test.

Act reference: FAAct section 3(1)-'taxable income'

Policy reference: FA Guide 1.1.C.50 Compensation

Last reviewed: 16 May 2016