4.13.2.70 Commencement of Lump Sum Preclusion Period

This topic

This topic contains information on the following:

  • when does the preclusion period commence,
  • when does lost earnings or lost capacity to earn begin,
  • lump sum and periodic payments for different events,
  • aggregated lump sums,
  • one lump sum settlement for multiple claims,
  • lump sums made under TAA,
  • date of commencement of the preclusion period, and
  • interaction of preclusion periods with other waiting periods.

When does the preclusion period commence

The following table shows when the lump sum preclusion period commences under various conditions.

If… Then the lump sum preclusion period begins on the…
  • periodic compensation payments are being made for lost earnings or lost capacity to earn, AND
  • entitlement to the periodic payments ceases altogether,
day after the last of the periodic payments stop, regardless of any breaks in the receipt of the periodic payments or the rate of the payments.
  • part of an entitlement to periodic compensation payments is received in the form of a lump sum, AND
  • the periodic payments continue at a reduced rate,
first day on which the periodic compensation payments are reduced.
periodic compensation continues at the same rate, day after the periodic ceased or the first day the periodic compensation payments are reduced.
none of the above applies, day the lost earnings or lost capacity to earn began.

Explanation: If a compensation recipient receives a lump sum compensation payment and periodic payments in respect of the same compensable event, and the periodic payments are NOT reduced (such as in New South Wales Dust Diseases compensation cases) the start date of the preclusion period cannot be determined. In these cases:

  • direct deductions continue to be made from compensation affected payments, AND
  • the compensation recipient is advised that a preclusion period will be applied when periodic payments eventually cease or are reduced because of a subsequent lump sum payment.

Act reference: SSAct section 1170 Lump sum preclusion period

When does lost earnings or lost capacity to earn begin

Where periodic payments have not been made, lost earnings or lost capacity to earn would usually commence on the day of the compensable event (defined at SSAct section 17(5A)).

However, some situations are not so clear cut, such as where the compensation recipient continues working with no loss of income following the injury.

Delegates should adopt a common sense approach to making an informed, factual decision based on the impact the compensable injury has had on the individual's earnings and earning capacity.

Examples:

  • A person is injured on 27 June 1997 and receives full rate sick pay until ceasing employment on 13 July 1999. The person receives no periodic compensation while employed and successfully settles a common law action in October 2000. The start date of the preclusion period should be 14 July 1999, the day after employment ceased as this is the date the lost earnings commenced.
  • A person is awarded a lump sum for pain and suffering and future economic loss in respect of injuries sustained at birth. The start date of the preclusion period should be the child's DOB as this is the date when the loss of earning capacity commenced.
  • The preclusion period start date for compensation cases involving post traumatic stress disorder as a result of the 1964 Voyager accident would generally be:
    • the day after employment ceased where the person continued employment with no loss of earnings, OR
    • the date of injury where the person continued working with a loss of income, i.e. diminished promotion prospects, until reaching retirement age and ceasing work as a consequence.

Act reference: SSAct section 17(5A) Receives compensation, section 1170 Lump sum preclusion period

Policy reference: SS Guide 4.13.2.10 Treatment of Specific Lump Sums, 4.13.1.30 Effect of Compensation on Compensation Affected Payments

Lump sum & periodic payments for different events

If a lump sum and periodic payments are made in respect of separate compensable events then they are treated as separate issues and the preclusion period is served irrespective that the periodic payments are being made at the same time. The start of the preclusion period is the date of loss of earnings or lost earnings capacity, for each separate compensable event.

Act reference: SSAct section 1170 Lump sum preclusion period

Aggregated lump sums

If multiple lump sums are received in respect of the same injury, disease or condition, AND at least one payment is made in respect of lost earnings or lost earnings capacity, then the lump sums are aggregated and treated as one lump sum.

The date of commencement of the preclusion period for multiple lump sums does not change and is determined by the conditions in the table above. However, the duration of the preclusion period will be amended and extended with each subsequent lump sum.

Act reference: SSAct section 1171 Deemed lump sum payment arising from separate payments

Policy reference: SS Guide 4.13.2.50 Aggregation of Multiple Lump Sums

One lump sum settlement for multiple claims

Where one lump sum is paid in settlement of multiple claims, i.e. different compensable events, this lump sum is apportioned for each compensable event. (Federal Magistrates Court in Savage v DEWR (2008)).

Act reference: SSAct section 1170 Lump sum preclusion period

Policy reference: SS Guide 4.13.2.50 Aggregation of Multiple Lump Sums

Lump sums made under TAA

Under TAA some Centrelink income support recipients cannot receive compensation for the first 18 months after their injury. Any lump sum they subsequently receive will not include compensation for lost earnings for this initial period. In effect this means the Centrelink income support recipient is subject to an 18 month 'non-payment period' under the TAA.

Despite this 'non-payment period', the start date of the lump sum preclusion period is taken to be the date of the compensable event, i.e. the date when the lost earnings or lost capacity to earn began. However, as there is no double dipping in this situation, any CAPs made during the TAA 'non-payment' period must be waived under SSAct section 1237AAD.

However, where periodic compensation has been made the start date of the preclusion period is the day after the last of the periodic payments stop, regardless of any breaks in the receipt of the periodic payments or the rate of the payments.

Act reference: SSAct section 1237AAD Waiver in special circumstances

Policy reference: SS Guide 6.4.7 Waiver of CAPs During Victorian TAA Non-Payment Periods

Date of commencement of the preclusion period

The Federal Court decision of Kertland (FC 99/1596) confirmed that where a person is precluded from receiving compensation because of the effect of the TAA, the date of the accident or injury is the date that the loss of earnings or loss of earnings capacity begins. This is irrespective of the fact that the compensation recipient may not be able to receive compensation for 18 months after the accident or injury.

Where periodic compensation has been made, the start date of the preclusion period is the day after the last of the periodic payments stop, regardless of any breaks in the receipt of the periodic payments or the rate of the payments.

In lieu of any other obvious and defensible start date the preclusion period start date for non-earning minors should be the date of the injury or accident.

Interaction of preclusion periods with other waiting periods

If a person claims income support during a preclusion period any waiting period applicable and any compensation preclusion period is served concurrently. If a person claims income support once a preclusion period ends they will serve any applicable waiting period.

Last reviewed: 7 November 2016