4.13.3.20 Effect of Periodic Compensation on a Compensation Recipient

This topic

This topic contains the following information on the effect of periodic compensation payments on the CAP of a compensation recipient.

  • general effect of periodic compensation payments,
  • periodic compensation as a direct deduction,
  • effect on CAP when couple separate,
  • income test concession changes on 20 September 2001, and
  • periodic compensation - withdrawal of income test concession.

General effect of periodic compensation payments

The following table explains the general effect of periodic compensation payments on the compensation recipient's CAP.

If … Then …
the compensation recipient was not qualified for AND receiving a CAP at the time of the compensable event, the periodic compensation is assessed as a dollar for dollar rate reduction against the rate otherwise payable.
the compensation recipient was qualified for AND receiving a CAP at the time of the compensable event, the periodic compensation is assessed as ordinary income.

Explanation: As this is a complex provision of the legislation, each case will need to be examined on the facts relating to the case.

Act reference: SSAct section 1173 Effect of periodic compensation payments on rate of person's compensation affected payment, section 23(4A) Despite subsection (4) if…

Policy reference: SS Guide 4.13.3.10 Overview of Periodic Compensation Payments

Periodic compensation as a direct deduction

Periodic compensation is generally a dollar for dollar reduction against the daily rate of CAP payable. The reduction is applied to the compensation recipient's rate after the ordinary income and assets test has been applied. If the compensation recipient receives or claims a CAP, and is qualified, then the periodic compensation will only have an impact on the partner's rate if there is excess compensation after the dollar for dollar rate reduction is applied to the maximum basic qualified rate.

Effect on CAP when couple separate

If a couple separate and periodic compensation payments are affecting each partner's (1.1.P.85) CAP, there should be no further effects on the CAP of the compensation recipient's former partner. The compensation recipient is treated as a single person. If the couple reconcile, the appropriate effect on the compensation recipient's partner should recommence.

Act reference: SSAct section 1173 Effect of periodic compensation payments on rate of person's compensation affected payment, section 1174 Effect of periodic compensation payments on rate of partner's compensation affected payment

Policy reference: SS Guide 4.13.3.30 Effect of periodic compensation on the partner of a compensation recipient

Income test concession changes on 20 September 2001

Prior to 20 September 2001, an income test concession applied to periodic compensation payments made for a compensable injury that occurred while the compensation recipient OR their partner was receiving a CAP. This concession allowed periodic compensation payments to be treated as ordinary income rather than a direct deduction for the compensation recipient AND, where applicable, that person's partner.

From 20 September 2001 the assessment of periodic compensation payments for partners of compensation recipients changed. As a result this concession was refined and targeted at compensation recipients only. From this date the concession applies only if the COMPENSATION RECIPIENT was receiving a CAP at the time of the compensable event.

If only the partner was receiving the CAP at the time of the compensable event then the periodic payment is a direct deduction for the compensation recipient. Any excess compensation is assessed as ordinary income for the partner.

Act reference: SSAct section 1173 Effect of periodic compensation payments on rate of person's compensation affected payment, section 1174 Effect of periodic compensation payments on rate of partner's compensation affected payment

Policy reference: SS Guide 4.13.3.10 Overview of Periodic Compensation Payments, 4.13.3.30 Effect of periodic compensation on the partner of a compensation recipient

Periodic compensation - withdrawal of income test concession

If the compensable event occurs while the compensation recipient is qualified for AND receiving a CAP, any periodic compensation paid in respect of that event is assessed under the ordinary income test.

If it is subsequently determined that the income test concession should not have been applied (i.e. the compensation recipient was not entitled to receive the CAP at the time of the compensable event), the income test concession should be stopped and direct deductions applied. This would happen where a contravention of the SSAct or the SS(Admin)Act had occurred.

Act reference: SSAct section 1173(4) Effect of periodic compensation payments on rate of person's compensation affected payment

Policy reference: SS Guide 4.13.1.20 Assessment of Compensatory Type Payments

Last reviewed: 7 November 2016