Workcover compensation and Centrelink


We often receive emails and inquiries from injured workers about the unfortunate, but real fact, that after their long fight with workcover resulting in some monetary compensation, a (large) part of that compensation is simply taken away by Centrelink, leaving the injured worker with little compensation for their work injury, pain and suffering and economic loss…

Workcover compensation and Centrelink

Can Centrelink take away your workcover compensation?

Under the Centrelink laws, “compensation” is described (and defined) as a payment for a personal injury/ illness or which replaces lost income or earning capacity. Compensation includes car accidents (TAC), Workcover payments including redemptions (i.e. SA) of income maintenance; any other personal injury (i.e. slips/falls and even medical negligence/malpractice resulting in injury).

Sadly, if you, as an injured worker, and/or your wife/husband, de facto partner has received Centrelink payments following your work injury, and you are awarded compensation for that injury, Centrelink will be entitled to recover an amount from your workcover settlement monies.

Centrelink is entitled to take its portion from your workcover settlement monies before any money is paid to you, the injured worker.

In essence, this means that once your workcover claim has reached settlement (through mediation or Court), your insurance company has to inform Centrelink, and calculate the amount of money Centrelink is entitled to. Your insurance company will then send this calculated amount of money to Centrelink, before paying you (or your lawyer) the remaining balance. This process often causes a delay in the injured worker’s actual receiving of his/her settlement award. It can take weeks, sometimes months.

It’s important that you are aware that just about all types of Centrelink income maintenance payments are recoverable by Centrelink following a workcover payout— including unemployment benefits (NewStart), Parenting Allowances and Disability Support Pension.

It is very difficult to work out exactly how a workcover lumpsum/settlement will impact on your Centrelink benefits, and to calculate exactly how much Centrelink will take from your settlement monies. Most decent lawyers will be able to give you an idea of whether you owe money to Centrelink (and roughly how much) or whether your Centrelink payments will cease for a period of time following the compensation payment, or whether there will be a certain length of time that you won’t be able to claim any Centrelink benefits (aka the preclusion period) after your settlement.

Because the complexity of the calculations your lawyer will only be able to give you a rough estimate and as such you (the injured worker) will not know the exact amount of money that will be left in your pocket at the end of your workcover claim / law suit.

Note: There is an online calculator provided by Centrelink to help injured people and their lawyers calculate the preclusion period and the amount of money you owe to Centrelink. However this calculator also only gives a very rough estimate.

Why is Centrelink entitled to a portion of your workcover settlement monies?

The essential reason as why Centrelink is allowed to a portion of your workcover settlement is because social security should be reserved for people who are in dire financial difficulty and need a helping hand from the Government. So if you have just received a large lumpsum/ settlement payment, you are basically deemed not to need social security, or at least for a period of time (aka the preclusion period).

This means that, for example, if your workcover lumpsum/settlement is all the money the insurance paid as belated (arrears) weekly payments – which is income – and you have been receiving Centrelink benefits for that entire time, Centrelink will most likely take away the full amount of money they paid you during that period. So, this would be the case, for example, if your workcover insurer denied your weekly payments, forcing you onto Centrelink, and then you would go to Court and be awarded all the weekly payments the insurer owned you (pay back all weekly payments).


You worked and earned $1000 a week. You injured yourself at work on 1 Jan 2015 badly enough to have to stop work. Your claim was denied, or your weekly payments denied and you were forced to apply for Centrelink. You received $500 per fortnight from Centrelink as of 1 Jan 2015. On 31 March 2015 (3 months later) you are awarded compensation from your insurance company for your past income loss (weekly pay), namely 13 weeks pay at $1,000 per week, or around $13,000. However, during those 13 weeks, you received $3,250 from Centrelink ($250 per week x 13). In this example, Centrelink will recover $3,250 from your settlement amount and you will then receive the balance of $9,750.

The above example is a very simple one – in reality Centrelink entitlements and recoveries can be very complex, especially when it comes to calculation how much they’re entitled to take for a settlement that includes compensation for pain and suffering as well as past and future economic loss.

The number of weeks, months or even years that your Centrelink payments will be affected because of  your workcover lumpsum/settlement payment is known as a ‘preclusion period‘. This preclusion period means that because of your awarded lumpsum/settlement monies you are in fact precluded from receiving Centrelink for a certain amount of weeks, months or years. For example, if you were awarded about half a million dollars for your injury (pain and suffering and economic loss), your preclusion time will be around 6 or 7 years. So, in other words, for the next 6 or 7 years you will not be allowed to claim any Centrelink benefits.

In some other workcover cases, you may, for example, not have even been on Centrelink for the length of the preclusion period. For example, if your preclusion period is calculated by Centrelink as 26 weeks, but you had only been on Centrelink for 20 weeks when you were awarded the compensation, there are still another 6 weeks of the preclusion period remaining. This means that following settlement, you will not be allowed any Centrelink benefits for the following 6 weeks. However, once those 6 weeks pass, you can again start receiving Centrelink payments.

It is important that you talk to your lawyer about any impact Centrelink will have on your workcover claim / lumpsum / settlement, as to avoid making serious plans on how you will try to make the most of your moneys (i.e. buy a house, invest etc.)

On a personal note, it is worth noting that Centrelink can also make mistakes in their calculations so it is important to have it checked.

Centrelink decisions can also be disputed if you disagree with the amount or the preclusion period. But again, seek legal advice.

4 Responses to “Workcover compensation and Centrelink”

  1. Gosford,
    what a lovely place to retire on your earnings garnered from the misery and suffering of your fellow man,

    92-100 Donnison St Gosford NSW 2250

    interestingly they have re badged their building and removed the old workcover logo,
    now it just has that cringe-worthy “waratah” image WTF?,151.340556,3a,90y,4.79h,100.31t/data=!3m7!1e1!3m5!1ssvW-EL3KwuYr7vjelUl2OQ!2e0!5s20150501T000000!7i3328!8i1664

    and yes centrelink will tag team with workcover in helping to pummel you into financial submission just so you know “your place”

    where is good ole hank” the wank” jongen in his centrelink cape and flashy red jocks when you need a good denial or two–the-human-face-of-centrelink

    Born in the Netherlands, Hank’s family migrated to Australia and settled in the mining town of Kalgoorlie in WA.

    quote below with hank in full propaganda mode:

    “We have high expectations of our staff who receive intensive training. Our role is always to help people through tough times”

    General Manager – Communication
    Mr Hank Jongen PSM

    Postal Address
    PO Box 7788 Canberra Business Centre ACT 2610
    (02) 6155 7788
    (02) 6133 0091

    centrelink needs an overhaul as of last decade

    jadednotfaded July 17, 2015 at 1:24 am
  2. Interesting article.
    I would add and advice injured people that they also will face the ruthless and uneducated ATO’s employees.
    Time will come to do income declaration and here it comes the ATO charging you 50-60% tax on income because they don’t care a “&*^@#$%” if the sum you received relates to 2-3 years of unpaid salary, they only look at the sum and treat you like a rich cheater!
    ATO also will not “intentionally” consider your missed entitlements such as the chance to apply for salary sacrifice, the free tax threshold etc. etc..
    ATO will treat you like a cheater who earned too much money so you must pay for it.
    Did I mention that if you don’t comply (see OBEY) ATO will threat you with legal actions, then they refer your “case” to their debt collection agency, finally they take the money from your bank accounts, they even state that once they GARNISHEE your account you have no RIGHT to appeal it!!!
    Good luck with the scam compensation system!

    xchangingvictim July 16, 2015 at 11:38 am
    • Workcover payments which are in lieu of wages (i.e. replacing what you’ve lost in wages) are definitely taxable income. It’s grossly unfair indeed that when you merely recover your lost wages (weekly pay) they’re taxed big time!
      Compensation payments for damages, medical, etc, usually are not considered income. Likewise a common law settlement by means of mediation (out of court) is also NOT taxable (settlement awards through court are partly taxable).
      As income tax is a federal imposition it makes no difference which state you’re in. Also, the workcover insurance company should be withholding PAYG tax from your regular payments and you should be sent a PAYG Payment Summary (formerly known as a group certificate) after the end of the tax year.

      • Thanks very much, I do understand what you say.

        However, I have had a long battle with the insurance company (surprise!) and the employer whose obviously protect each other.
        They have refused to give me any PAYS tax statement but what they did they uploaded the informations straight to the ATO’s system WHICH refused to help me recover the PAYS statement and also the Ombudsman REF– USED to help me to recover the PAYS statement too!

        Is there something wrong in the system?

        xchangingvictim July 17, 2015 at 5:35 pm
read-before-u-commentThis is a statement pointing you to our seriously injured but esteemed and honourable Social Networking Sites Warning and our comment policy. A must read in the context of a very adversarial workcover system! Remember to mention in which state you reside if you seek advice.

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