If you are awarded a workcover payment, such as a settlement for pain and suffering and/or past and future economic loss, Centrelink is required by law to take workcover compensation payments into account when determining eligibility for most Centrelink payments.
We often receive questions from injured workers about Centrelink and how workcover compensation (settlement) affects your Centrelink benefits. Below is an example of such a frequently asked question.
Workcover compensation and Centrelink benefits
I have been awarded a workers’ compensation payment out of court, for pain and suffering and some economic loss amounting to $100,000 I received a letter from Centrelink stating that I will NOT be able to obtain any Centrelink benefits for a period of 1 and 1/2 years. I am unable to work again, and I have been living off (periodic) weekly payments and some of my spouse’s savings. My weekly payments have now ceased.
The reason behind this is to prevent people receiving both compensation and Centrelink payments for a “preclusion” period during which they are expected to live on the lump sum payment.
The preclusion period depends on whether the lump sum /settlement was obtained by consent, following a claim related to lost earnings or lost earning capacity. In such cases, Centrelink counts only 50% of the lump sum (known a the “compensation part”) to calculate the number of weeks in the preclusion period.
This amount is then divided by the income test’s cut-off limit for a single pension, currently $934.30 a week i.e. the income above which the age pension phases out. To find your preclusion period, take 50 per cent of your lump sum i.e. $50,000 and divide this by $934.30, which equals 53 weeks.
Since the injured worker was receiving periodic compensation payments prior to receiving the lump sum/ settlement, the preclusion period begins on the day after the injured worker’s WorkCover payments stopped.
However, even during a preclusion period, an injured worker may still apply for a Carer Allowance, Mobility Allowance, Commonwealth Seniors Health Card, Disaster Relief Payment, Family Tax Benefit. The injured worker’s spouse is not precluded and may receive Centrelink payments under standard conditions, subject to the assets and income tests as a couple.
Note that one section of the law (S1184K) allows Centrelink the discretion to disregard all or part of a compensation payment in special circumstances but only if your situation is so unusual, uncommon or exceptional that the usual application of the preclusion period would appear unduly harsh.