The purpose of this blog is to explain one of the refunds which is deducted from the settlement sum or favorable judgment award which is the refund to Centrelink.
In many but not all claims for personal injury there will be a claim for past and future loss of income which is the claim for economic loss.
If an injured person has been unable to work and has successfully applied to Centrelink for financial assistance such as Newstart Allowance or the Disability Support Pension and is making a claim for past and future economic loss, some or all of the money or benefits received from Centrelink will be refundable to Centrelink.
Prior to attending a settlement conference or a mediation, your solicitor should or will provide you with a written advice providing an explanation of the anticipated or likely settlement range or possible settlement outcomes. Your solicitor should or will also provide you with advice regarding the likely refunds which will come out of the settlement sum which may include a refund to Centrelink, Medicare Australia and WorkCover Queensland. There might also be a refund owing to a private health insurer if you have private health insurance and have made claims relevant to your injury.
If the settlement of your claim includes a component or allowance for economic loss and if you have received payments from Centrelink, some or all of the money you have received from Centrelink may be refundable to Centrelink.
In addition, you may be precluded from receiving Centrelink benefits for period of time into the future depending on the amount of the settlement sum or favorable judgment award which is known as the preclusion period.
To calculate the preclusion period, Centrelink will review the terms of the settlement usually contained in a Deed of Release and there is a form that your solicitor will prepare and send to Centrelink answering various questions regarding the settlement of the claim and your particular circumstances.
To calculate the preclusion period, Centrelink assumes or deems that half of the settlement relates to economic loss so the settlement sum is divided by 50% and then is further divided by the lump sum divisor rule which is presently $1,287.70.
Let’s assume the date of injury was 1 January 2024 and the settlement sum is $300,000.00.
$300,000.00/2 = $150,000.00 divided by $1,287.70 = 116 weeks.
This means that the injured person in this example would be precluded or prevented from receiving Centrelink payments until 23 March 2026.
If the injured person had been in receipt of Centrelink payments from the date of the accident until now, the amount of the refund to Centrelink could not be more $61,580.20.
However, if you had only received say $10,000.00 from Centrelink from the date of the accident/injury to present then you would not have to pay Centrelink back any amount more than what you have received.
If there is no claim for economic loss then there would be no refund to Centrelink.
If the refund to Centrelink was as high as $60,000.00 then the claim for economic loss is likely to be much higher than this and from this example might be as high as $200,000.00 so making the claim for economic loss would be worthwhile plus the injured person has received and had the benefits of the Centrelink payments prior to the settlement of their claim.
Centrelink provides a free compensation estimator service on their website which can be accessed as follows:
Once a case or claim has settled you have an obligation to notify Centrelink of the change in your circumstances and within seven days, however, your solicitor and/or the lawyers acting for the respondent will attend to this promptly after the settlement.
After notifying Centrelink of the settlement, Centrelink will issue a letter which identifies any refund owing to Centrelink (if any) and any preclusion period.
Once you receive your settlement monies into your bank account, we think it is a good idea for you to also let Centrelink know promptly about your change of circumstances and within 7 days of receiving your settlement monies.
