Compensation - Revise the plan and reduce the supports – agreement to give up compensation

11. Revise the plan and reduce the supports – agreement to give up compensation

When a participant has an impairment caused by a personal injury and has entered into an agreement to give up a right to compensation in respect of that injury, the NDIA may reduce the reasonable and necessary supports under the participant's plan.

This applies to participants who gave up their right to receive compensation whether or not they were participants at the time they gave up their right to receive compensation.

If the person satisfies the requirements in When a plan is revised and supports reduced because of an agreement to give up compensation the person’s plan must be revised and their supports reduced.

11.1 Interaction with powers set out elsewhere in this Operational Guideline

If the person has entered into an agreement to give up his or her right to compensation, and the NDIA forms the opinion the agreement is void, ineffective or unenforceable, the NDIA should require the person to take action to recover compensation – see NDIA may require a participant or prospective participant to take action to claim compensation.

If the NDIA forms the opinion the agreement is enforceable, the NDIA should revise the plan and reduce the supports under this section (assuming the other criteria are satisfied).

11.2 When a plan is revised and supports reduced because of an agreement to give up compensation

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 (External website)) if the following criteria are met (rule 3.1(a) of the Compensation Rules):

  • the participant has sustained 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 participant has entered into an agreement to give up a right to compensation in respect of that injury;
  • because of that agreement, there are amounts that the participant did not receive by way of compensation (even if the participant received other amounts by way of compensation in respect of that injury); and
  • it was not reasonable, in the circumstances, for the participant to have entered into the agreement, taking into account:
    1. the disability of the participant, including whether it affected their ability to reasonably assess the terms of the agreement;
    2. the circumstances which gave rise to the entitlement or possible entitlement to compensation;
    3. any reasons given by the participant as to why they entered into the agreement;
    4. the impact (including the financial impact) on the participant and their family that would have occurred if the claim for compensation had been pursued or continued; and
    5. any other matter considered relevant, having regard to the objects and principles set out in the NDIS Act.

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).

11.3 Calculating the compensation reduction amount

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 have previously been, or would have been, funded by a compensation payment.

The NDIA has prepared a decision tree for calculating the compensation reduction amount where a participant has entered into an agreement to give up a right to compensation in respect of a personal injury to assist in working through the calculation.

11.3.1 Calculation of compensation reduction amount

To calculate the compensation reduction amount, follow these steps (rule 3.19 of the Compensation Rules):

Step 1

Assess the likely amount of the NDIS component of the compensation that the participant would have received under a judgement (other than a consent judgement) had the participant made a claim for compensation in respect of the personal injury.

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 they are 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 compensable injury and the date the person became a participant.

This step 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.

11.3.2 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 3.20 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 in a motor vehicle accident where two other drivers are at fault. In this instance, a participant may have received a settlement amount from one of the drivers and may have waived their right to compensation in respect of the other driver.

If a person has received a compensation payment from judgement or settlement in respect of the injury and a compensation reduction amount has been identified for the judgement or settlement, then the compensation reduction amount is to be amended as follows:

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 it is 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 that the participant will not be disadvantaged by this, and their compensation reduction amount will be lower.

11.3.3 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.

11.3.4 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 participant’s supports (rule 3.21 of the Compensation Rules).

11.3.5 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. This model will be modified and updated from time to time, and the NDIS will communicate any changes and the impact of these changes to affected participants.

11.4 Where a person receives a compensation payment and agrees to give up compensation

When a person receives a compensation payment awarded by a court and also agrees to give up compensation against another person, the payment and the agreement are to be treated separately and a compensation reduction amount is to be worked out for each. This means that more than one compensation reduction amount will apply to the person.

This page current as of
15 February 2019