Will I need to repay money to the government from my compensation settlement?
12 Jul 2017
- Personal Injury
Whether a person is injured as a result of a motor vehicle accident, a work accident or some other type of incident, there may be an entitlement to recover a lump sum by way of compensation for the injuries and losses arising from that injury. If that occurs, Richard Faulks, Managing Director of Snedden Hall & Gallop and highly experienced compensation lawyer, explains why it is essential that an injured person is aware of the potential liability to repay, out of any lump sum received, certain statutory payments, such as Medicare, that have been made for that person’s benefit following the injury.
In this blog post, Richard will discuss payments made to an injured person via:
- Centrelink; and
- The National Disability Insurance Scheme.
There are many circumstances where a person receives treatment for injuries sustained in a accident and then also receives some rebate or other benefit from Medicare in relation to that treatment. Since 1995, there has been legislation that requires notification to be given to Medicare and also that the injured person must repay any such benefits from the lump sum received. The refund is in fact made by the compensation payer prior to the payment out of any settlement sum.
It is possible to seek a statement from Medicare which can then be used to identify those items which are repayable so that an injured person is fully aware of the extent of that potential pay back liability.
Once a statement is received and the relevant items are identified, Medicare will issue a notice of charge which remains current for six months, confirming the amount of the pay back. If there is no current notice at the time when the settlement is paid, 10 per cent of the settlement money can be held back pending the identification of the appropriate pay back. Obviously it is important that an injured person is aware of this obligation which is compulsory in all cases. Notice must be given whether or not an injured person believes that any Medicare benefits have been received.
If an injured person suffers a loss of earning capacity as a result of a compensable injury, the Social Security Act 1991 (the SS Act) provides for the calculation of a period of time which is known as the “preclusion period”. If an injured person has received any social security benefits during that preclusion period, such payments are refundable from any settlement.
If Centrelink is aware of the claim, they will normally issue a notice to the relevant insurance company, as well as the injured person or their lawyers, confirming the obligation.
The amount of the pay-back is determined by the size of the lump sum. If there is no judgment from a court, the SS Act authorises the use of a formula to ascertain the number of weeks during which the preclusion period will apply.
For anyone who has been in receipt of even a small amount of Centrelink benefits, or may have some form of prior Centrelink debt, it is essential to seek legal advice about the effect of these provisions and the way in which any pay-back may apply. The pay-back to Centrelink will be deducted and paid by an insurer prior to any sum being paid to the injured worker.
3. National Disability Insurance Scheme
Many of those who suffer more serious injuries as a result of incidents like those listed above, may become entitled to the benefit of payments under the National Disability Insurance Scheme. The law that governs entitlements under that scheme is the National Disability Insurance Scheme Act 2013 (the NDIS Act). A person does not have to be catastrophically injured to be entitled to benefits under that scheme. If a relevant definition of “disability” is satisfied, there may well be payments made to an injured person to cover treatment, appropriate equipment and care. What is not usually understood is that these payments are potentially repayable under the legislation. An injured person may also have their entitlements under the scheme reduced as a result of a lump sum that is received.
The NDIS Act provides that any payments made under the scheme that are of a similar nature to those benefits payable in any lump sum settlement, will be refundable in a similar way to the Centrelink payments (see above). In those instances that a lump sum settlement is reached, rather than any court awarded damages, the NDIS Act provides a scheme whereby a compensation reduction amount is calculated. That sum is used to adjust any payments that may otherwise be payable to the injured person under the scheme going forward. This can have a dramatic effect, particularly for those who are catastrophically injured and would otherwise be entitled to quite substantial payments under a plan issued by the National Disability Insurance Agency.
The National Disability Insurance Agency has issued a guideline which assists injured persons and their lawyers to ascertain how a lump sum may impact upon future entitlement. The calculation dove-tails with the other obligations to repay Commonwealth benefits to Centrelink and Medicare.
Snedden Hall & Gallop can assist you
It is very important that an injured person knows as much as possible about the nature of any settlement that is proposed in their favour and, in particular, has a clear idea of what deductions will apply to any lump sum and the amount they are going to receive from the settlement. That will also enable an injured person to seek proper investment advice about how those funds should be used.
At Snedden Hall & Gallop, we have vast experience in ensuring that our clients understand the nature of their settlement from a compensation claim. We can also assist you in understanding the relevant deductions that will apply in your unique situation. Please contact us for any personal injury matter by phone on (02) 6285 8000 or by email. You can see details of our compensation representation here.