Compensation - Revise the plan and reduce the supports – compensation received from a judgement or settlement

13. Revise the plan and reduce the supports – compensation received from a judgement or settlement

When a participant, or person who later becomes a participant, has received compensation under a judgement or settlement in respect of a personal injury that caused their impairment, the NDIA may reduce the reasonable and necessary supports under the participant’s plan to take account of the compensation.

Where the NDIS component of the amount of compensation is either fixed or objectively identifiable, go to "Where the NDIS component is fixed by the judgement or settlement or can be objectively identified" (on this page).

Where it is not possible to identify the NDIS component of the amount of compensation but the judgement or settlement fixes an amount of compensation, go to "Where the NDIS component is not fixed by the judgement or settlement or cannot be objectively identified" (on this page).

This applies to participants who receive compensation whether or not they were participants at the time they received the compensation.

13.1 Where the NDIS component is fixed by the judgement or settlement or can be objectively identified

A participant’s plan must be revised and the reasonable and necessary supports stated in the plan reduced by an amount (the compensation reduction amount) if the following criteria are met (rule 3.1(a) of the Compensation Rules):

  • the person has suffered a personal injury which has caused, to any extent, their impairment, regardless of whether the person was a participant at the time of the injury;
  • the person was awarded compensation under a judgement or settlement in respect of that injury;
  • it is possible to identify the NDIS component of the amount of compensation; and
  • the NDIS component of the award of compensation is either fixed by a non-consent judgement or is objectively identifiable.

“Fixed by a non-consent judgement” means that a court has specified the NDIS component of the award of compensation.

“Objectively identifiable” means that even though the NDIS component of the compensation has not been specified, the NDIS component can be identified from the award. For example, commutation of benefits under a statutory scheme (i.e. where compensation is paid as a lump sum, rather by than periodic payments).

However, where a settlement or consent judgement specifies an amount for a compensation payment but does not specify the NDIS component of the compensation, that amount will not be deemed to be objectively identifiable.

If these criteria are met, the participant’s plan must be revised and the reasonable and necessary supports stated in the plan reduced by an amount equivalent to the compensation reduction amount (External website).

13.2 Calculating the compensation reduction amount where NDIS component is fixed by the judgement or settlement or can be objectively identified

The purpose of calculating the compensation reduction amount is to ensure that a participant does not receive funding from the NDIS for reasonable and necessary supports that are funded under an amount of compensation received from a judgement or settlement.

As a general rule, where a participant has received compensation by way of judgement or settlement and the NDIS component is fixed or can be objectively identified,

their funding for reasonable and necessary supports from the NDIS is to be reduced by an amount equivalent to the value of the compensation for care and support received under that judgement or settlement.

To calculate the compensation reduction amount, follow the steps below (rule 3.11 of the Compensation Rules).

The NDIA has prepared a decision tree for calculating the compensation reduction amount where a participant has received compensation under a judgement or settlement in respect of a personal injury that caused their impairment to assist in working through the calculation.

13.2.1 Calculation of compensation reduction amount

To calculate the compensation reduction amount (rule 3.11 of the Compensation Rules):

Step 1

Identify the NDIS component of the amount of compensation.

If the NDIS component includes a part that is by way of a periodic payment (for example, a payment each month or year), it is calculated as follows:

  • if the amount is specified in a judgement – that amount; or
  • if the amount is not specified in a judgement, but the NDIA is satisfied that a specified amount was paid by the defendant to ensure the provision of the periodic payments – that amount; or
  • otherwise – the value of the periodic payments as assessed in accordance with accepted actuarial standards, in consultation with the Scheme Actuary.

Step 2

Subtract the amount of any reduction in the participant’s funding that has occurred under a previous plan in respect of this personal injury (if any).

This reflects that a participant may have had earlier plans which incorporated a reduction in respect of the same personal injury. Each time a plan is replaced or reviewed, this new or reviewed plan is to take into account earlier compensation reduction amounts to ensure it is not double counted.

Step 3

Subtract an amount that the NDIA considers equivalent to the total of the amounts that were paid by the participant personally for supports of a kind that may be funded or provided under the NDIS in the period between the date of the judgement or settlement and the date the person became a participant.

This Step reflects a participant may have paid for their own supports for a period. This subtraction means the participant will not be disadvantaged by this, and their compensation reduction amount will be lower as a result.

13.2.2 Where the person has received more than one compensation payment

The compensation reduction amount is to be amended as set out below if the person has received a compensation payment for the personal injury (rule 3.6 of the Compensation Rules).

A participant may have more than one compensation claim in respect of the same injury. For example, a participant may sustain their injury at work and receive workers’ compensation payments as well as common law damages from a court ordered judgement.

If a person has received a compensation payment that is made up of a part that is included in a judgement or settlement and a part associated with an insurance or statutory scheme, and a compensation reduction amount has been identified for the judgement or settlement, then the compensation reduction amount is to be amended as follows:

  • Subtract any compensation reduction amount that has been worked out for (a) an insurance or a statutory scheme (under Revise the Plan and Reduce the Supports – Compensation Received under an Insurance Scheme or a Commonwealth, State or Territory Scheme) or (b) another judgement in relation to this injury (under "Revise the Plan and Reduce the Supports – Compensation Received from a Judgement or Settlement" (on this page).
  • Add the amount of any reduction in funding that has occurred under a previous plan in respect of this personal injury (if any).
  • This reflects that a participant may have had earlier plans which incorporated a reduction in respect of the same personal injury. Each time a plan is replaced or reviewed, this new or reviewed plan is to take into account earlier compensation reduction amounts to ensure they are not double counted.
  • Add the amount of any reduction in funding that the NDIA considered equal to the total amount paid personally by the participant for supports of a kind funded under the NDIS Act after the compensable event and before becoming a participant.
  • This reflects a participant may have paid for their own supports for a period. This addition means the participant will not be disadvantaged by this, and their compensation reduction amount will be lower.

13.2.3 Special circumstances

The NDIA may ignore the whole or part of a compensation reduction amount if the NDIA thinks it appropriate to do so in the special circumstances of the case (rule 3.10 of the Compensation Rules).

The Compensation Rules (External website) note that special circumstances may include financial hardship suffered by the participant but do not otherwise define what constitutes special circumstances, and a wide range of circumstances can be considered.

13.2.4 Compensation reduction amount cannot be negative

The compensation reduction amount cannot be negative. If, after working out the compensation reduction amount, the amount is nil or less than nil, the NDIA is to record the compensation reduction amount as nil and therefore there will be no reduction in the person’s supports (rule 3.12 of the Compensation Rules).

13.2.5 Supports must be reduced by compensation reduction amount

Where a compensation reduction amount has been calculated, the participant’s funding for reasonable and necessary supports is to be reduced by an amount equivalent to the value of the compensation that they would have received for those supports under a judgement.

The amount is to be recovered over the expected lifetime of the participant in accordance with accepted actuarial standards in consultation with the Scheme Actuary, and not as a lump sum.

13.3 Where the NDIS component is not fixed by the judgement or settlement or cannot be objectively identified

A participant’s plan must be revised and the reasonable and necessary supports stated in the plan reduced by an amount (the compensation reduction amount) if the following criteria are met (rule 3.1(b) of the Compensation Rules):

  • the person has suffered a personal injury which has caused, to any extent, their impairment, regardless of whether the person was a participant at the time of the injury;
  • the person was awarded compensation under a judgement or settlement in respect of that injury;
  • the NDIS component of the amount of the judgement or settlement is not fixed or cannot be objectively identified; and
  • the judgement or settlement fixes a total amount of compensation in respect of the injury, but it is not itemised.

If these criteria are met, the participant’s plan must be revised and the reasonable and necessary supports stated in the plan reduced by an amount equivalent to the compensation reduction amount (External website) (external).

13.4 Calculating the compensation reduction amount where the NDIS component is not fixed by the judgement or settlement or cannot be objectively identified

The purpose of calculating the compensation reduction amount is to ensure that a participant does not receive funding from the NDIS for reasonable and necessary supports that are funded under an amount of compensation received from a judgement or settlement.

As a general rule, where a participant has received compensation by way of judgement or settlement (but the NDIS component is not fixed or cannot be objectively identified), their funding for reasonable and necessary supports from the NDIS is to be reduced by an amount equivalent to the value of the compensation for care and support calculated to have been received under that judgement or settlement.

To calculate the compensation reduction amount, follow the steps below (rule 3.13 of the Compensation Rules).

The NDIA has prepared a decision tree for calculating the compensation reduction amount where a participant has received compensation under a judgement or settlement in respect of a personal injury that caused their impairment to assist in working through the calculation.

13.4.1 Initial calculation of compensation reduction amount

Calculate the compensation reduction amount as follows:

  • Identify the amount of compensation fixed under the judgement or settlement.
  • Subtract the sum of the amounts (if any) payable in respect of the amount of compensation under:

(i) The Health and Other Services (Compensation) Act 1995

(ii) The Health and Other Services (Compensation) Care Charges Act 1995

(iii) Part 3.14 of the Social Security Act 1991, or

(iv) A law of the Commonwealth, a state or a territory, prescribed by the Compensation Rules (External website) (external).

This has the effect of reducing the participant’s award of compensation because other legislation requires the participant to repay amounts back from their award of compensation. It would be unfair to the participant to not reduce the compensation received in these circumstances.

  • If the person is subject to a period of preclusion – subtract an amount that reflects the value of any period of preclusion:

(i) that arises from a Commonwealth, a state or a territory statutory scheme of entitlements (for example, the Social Security Act 1991); and

(ii) is in respect of the injury.

This has the effect of reducing the participant’s award of compensation because the participant is subject to a period of preclusion under a statutory scheme of entitlements. It would be unfair to the participant to not reduce the compensation received in these circumstances.

  • If the person is not subject to a period of preclusion and:

(i) the participant claimed damages in relation to lost earnings or lost capacity to earn; and

(ii) the amount of compensation fixed under the judgement or settlement included an amount in respect of those damages; then subtract 50% of the amount of compensation.

This reflects the general approach to calculating the amount of an award of compensation that is not for care and supports (i.e. for damages in relation to lost earnings or lost capacity to earn).

13.4.2 Ensure that the compensation reduction amount is not greater than the value of the NDIS providing reasonable and necessary supports

Calculate the value of the reasonable and necessary supports that would have been provided to the participant and funded under the NDIS Act over the participant’s expected lifetime had the participant been a participant from the time of the compensable event. This amount is to be calculated in accordance with any applicable actuarial model published by the NDIA on its website.

If this amount is less than the amount calculated under heading 13.4.1, then this amount replaces the amount calculated under heading 13.4.1 as the compensation reduction amount.

If this amount is greater than the amount calculated under heading 13.4.1, then the amount determined under heading 13.4.1 remains as the current compensation reduction amount.

13.4.3 Subtract any reasonable and necessary supports paid by the participant

Subtract an amount equivalent to the total of the amounts that were paid by the participant for supports of the kind that funded under the NDIS in the period between the compensable event and the date the person became a participant.

This reflects that a participant may have paid for their own supports for a period. This subtraction means that the participant will not be disadvantaged by this, and their compensation reduction amount will be lower as a result.

13.4.4 Subtract any amounts obtained by the NDIA from the participant from the previous recovery of NDIS amounts or compensation reduction amounts

Subtract any recoverable amounts obtained by the NDIA from the participant under sections 106 and 107 of the NDIS Act in respect of the compensable amount. See Amount payable to NDIA where participant receives compensation from a judgement (other than a consent judgement) and Amount payable to NDIA where participant receives compensation from a consent judgement or settlement.

Subtract any amount deducted under section 105B of the NDIS Act. See What are the consequences if a person does not comply with a notice?

Subtract the amount of any previous compensation reduction amount determined and applied by the NDIA. This reflects that a participant may have had earlier plans which incorporated a reduction in respect of the same personal injury. Each time a plan is replaced or reviewed, this new or reviewed plan is to take into account earlier compensation reduction amounts to ensure it is not double counted.

13.4.5 Where the person has received more than one compensation payment

The compensation reduction amount is to be amended as set out below if the person has received a compensation payment for the personal injury (rule 3.15 of the Compensation Rules).

A participant may have more than one compensation claim in respect of the same injury. For example, a participant may sustain their injury at work and receive workers’ compensation payments as well as common law damages from a court ordered judgement.

If a person has received a compensation payment that is made up of a part that is included in a judgement or settlement and a part associated with an insurance or statutory scheme, and a compensation reduction amount has been identified for the judgement or settlement, then the compensation reduction amount is to be amended as follows:

  • Subtract any compensation reduction amount that has been worked out for (a) an insurance or a statutory scheme (under Revise the Plan and Reduce the Supports – Compensation Received under an Insurance Scheme or a Commonwealth, State or Territory Scheme) or (b) another judgement in relation to this injury (under "Revise the Plan and Reduce the Supports – Compensation Received from a Judgement or Settlement" on this page).
  • Add the amount of any reduction in funding that has occurred under a previous plan in respect of this personal injury (if any).
  • This reflects a participant may have had earlier plans which incorporated a reduction in respect of the same personal injury. Each time a plan is replaced or reviewed, this new or reviewed plan is to take into account earlier compensation reduction amounts to ensure they are not double counted.
  • Add the amount of any reduction in funding that is equal to the total amount paid personally by the participant for supports of a kind funded under the NDIS Act after the compensable event and before becoming a participant.
  • This reflects a participant may have paid for their own supports for a period. This addition means that the participant will not be disadvantaged by this, and their compensation reduction amount will be lower.

13.4.6 Special circumstances

The NDIA may ignore the whole or part of a compensation reduction amount if the NDIA thinks it appropriate to do so in the special circumstances of the case (rule 3.10 of the Compensation Rules).

The Compensation Rules (External website) note that special circumstances may include financial hardship suffered by the participant but do not otherwise define what constitutes special circumstances, and a wide range of circumstances can be considered.

13.4.7 Compensation reduction amount cannot be negative

The compensation reduction amount cannot be negative. If, after working out the compensation reduction amount, the amount is nil or less than nil, the NDIA is to record the compensation reduction amount as nil and therefore there will be no reduction in the person’s supports (rule 3.16 of the Compensation Rules).

13.4.8 Supports must be reduced by compensation reduction amount

Where a compensation reduction amount has been calculated, the participant’s funding for reasonable and necessary supports is to be reduced by an amount equivalent to the value of the compensation that they would have received for those supports under a judgement.

The amount is to be recovered over the expected lifetime of the participant in accordance with accepted actuarial standards in consultation with the Scheme Actuary, and not as a lump sum.

13.5 Where a person receives a compensation payment awarded by a court and another payment as part of a settlement

When a person receives one compensation payment awarded by a court and another payment as part of a settlement, the payments are to be treated separately and a compensation reduction amount is to be worked out for each compensation payment. This means that more than one compensation reduction amount will apply to the person.

This page current as of
2 December 2018