Editors --- "Compensation preclusion period: aggregation of lump sums; legislative changes; special circumstances" [2006] SocSecRpr 32; (2006) 8(3) Social Security Reporter, Article 9

• BANICEK and SECRETARY TO THE DEWR
• Background
• The issues
• The legislation
• Discussion
• Formal decision

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Compensation preclusion period: aggregation of lump sums; legislative changes; special circumstances

BANICEK and SECRETARY TO THE DEWR

Decided: 19th May 2006 by L. Hastwell

Background

Banicek sustained injuries to her back in the course of her employment. She also suffered from dermatitis that was employment related. Between 1998 and 2004, Banicek received three separate lump sum workers’ compensation payments for these injuries. The first lump sum related to the back condition, the second to her dermatitis condition and the third payment was said to have been made in relation to both conditions.

Two of the lump sum payments made to Banicek did not include a component for economic loss. The last lump sum payment, which was made following a settlement reached on 16 June 2004, included a component for economic loss.

In May 2005, Banicek applied for disability support pension. She was advised that she would be subject to a preclusion period, on the basis that the three lump sum payments would be added together and treated as one lump sum payment. The preclusion period was calculated as running from 19 June 2004 to 16 December 2005.

Ms Banicek sought review of this decision, which was affirmed internally and by the SSAT. She then applied to the AAT for a review.

The issues

The issues for determination by the Tribunal in this case were:

· whether the three lump sum payments were to be added together and treated as one lump sum for the purposes of the compensation provisions in the Act; and

· whether there were any special circumstances in the case.

The legislation

Compensation affected payments are not payable during a preclusion period, as provided for in sections 17(1)-(3), 1169(1), 1171(1)-(2) and 1184K(1) of the Social Security Act 1991 (the Act). Sections 1171(1) and (2) of the Act provide, as follows:

1171(1) If:

(a) a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and

(b) at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;

the following paragraphs have effect for the purposes of this Act and the Administration Act:

(c) the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;

(d) the single payment is taken to have been received by the person:

(i) on the day on which he or she received the last of the multiple payments; or

(ii) if the multiple payments were all received on the same day, on that day.

1171(2) A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.

Section 1884K(1) provides:

1184K(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

(a) not having been made; or

(b) not liable to be made;

if the Secretary thinks it is appropriate to do so in the special circumstances of the case.

Discussion

The AAT noted that section 1171(1) of the Act is worded broadly and that it would apply to any lump sum payment. The AAT noted that section 1171(1) did not refer to ‘lump sum compensation payments’ and therefore was not limited in its application to lump sum payments made in respect of lost earnings or lost capacity to earn.

The AAT accepted that, as the third lump sum payment made to Banicek was stated to have been made in relation to both the back condition and the dermatitis condition, section 1171(1) applied such that the three lump sum payments were to be aggregated.

The AAT then considered whether there were any special circumstances in this case. The AAT concluded that there were special circumstances in the case due to the unfairness occasioned to the applicant by aggregating the lump sum payments. The AAT considered the unfairness arose because:

· there was a significant time that had elapsed between the first and the third lump sum payment;

· the applicant had received advice, which was correct at the time it was given, that the first two lump sum payments she received would not disentitle her to social security benefits;

· the applicant had not received weekly payments in relation to the dermatitis condition;

· the third payment could only have related to the redemption of weekly payments in respect of the back condition; and

· the applicant and her husband had inadvertently put themselves in difficult financial circumstances.

The AAT considered the special circumstances of this case warranted part of the lump sum payments being disregarded. The AAT determined that $15,693.04, representing the lump sum payment made in respect of the dermatitis condition, should be disregarded for the purposes of calculating the preclusion period.

Formal decision

The AAT set aside the decision under review and remitted the matter to Centrelink for the recalculation of the preclusion period.

[S.O.]