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Lump sum compensation payments
Lump sum compensation payments are not for a fixed time period.
Lump sum compensation payments may include any of the following components:
- medical costs
- rehabilitation
- economic loss
- non-economic loss
- solicitors’ costs
- pain and suffering
- impairment.
Our customers must tell us if they get or will get a lump sum compensation payment. They must also tell us about lump sum compensation payments their partner gets or will get.
Compensation payments may affect their eligibility for an income support payment or concession for a period of time. This is known as a preclusion period.
There may be more than one lump sum payable for a compensable event. If any of the lump sums have an economic loss component, the payment is treated as one lump sum. We use the combined total to calculate the customer’s preclusion period.
The customer may get a lump sum by consent, to settle a claim including lost earnings or lost capacity to earn. In this situation, half of the gross lump sum is treated as compensation to assess the preclusion period.
A court or tribunal may award compensation after a full and contested hearing. The amount the court awards for economic loss is the amount treated as a compensation lump sum. Read more about compensation part of lump sum - judgement by contested hearing on the Social Security Guide’s website.
Example of a compensation lump sum and the effect on the customer’s income support payment
Doug was injured in a motor vehicle accident on 1 May 2022. On 1 June 2022, he claimed an income support payment from us as he was unable to work. Doug also lodged a claim for compensation.
Doug settled his claim for compensation on 1 July 2023 for $400,000. The lump sum included a part representing economic loss. We used 50% of the gross lump sum to calculate Doug’s payment preclusion period.
Doug’s preclusion period was for 171 weeks from 1 May 2022 to 10 August 2025.
We calculated a charge or overpayment for Doug’s payment from us for 1 June 2022 until his payment was cancelled. We recovered it from Doug’s compensation lump sum before the balance was released to him.