Permanent impairment payments under the MRCA

This page explains how you may be entitled to receive compensation for any permanent impairment (PI) you have suffered as a result of injuries or diseases which have resulted from your Australian Defence Force (ADF) service rendered on or after 1 July 2004.

This page also outlines the payment choices that are available to you if you are granted PI compensation under the Military Rehabilitation and Compensation Act 2004 (MRCA) and provides information to assist in making that payment choice.

Please note that if you are discussing your payment choices with a financial and/or legal adviser, you should ensure that he or she has a copy of this page for your appointment.

What is a PI payment?

If you have an injury or disease which is accepted as related to your ADF service (i.e. an accepted condition) then you may be entitled to receive compensation from DVA if:

• you have a resulting impairment; and
• the impairment is likely to continue indefinitely; and
• your injury or disease has stabilised.

PI compensation is paid in respect of any permanent physical and/or mental impairment in combination with any lifestyle restrictions resulting from your accepted conditions.

What if my injury or disease has not stabilised?

An interim payment of PI compensation may be payable where:

• you have an impairment as a result of your accepted condition/s; and
• the impairment is likely to continue indefinitely; and
• the impairment satisfies the minimum threshold levels as prescribed in the MRCA; and
• a final assessment of the degree of impairment cannot be made because your condition/s have not stabilised.

How are PI payments calculated?

The amount of PI compensation you may be entitled to is calculated from the level of physical and/or mental impairment resulting from all of your accepted conditions and the effect that this impairment has on your lifestyle.

The impairment from all of your accepted conditions is combined to arrive at a total impairment rating on a scale from 0 to 100 points. The impairment rating is then combined with the type of service you were rendering at the time of your injury along with a lifestyle rating (from 0 to 7) to determine the compensation payable.

In general, the higher the degree of impairment caused by your accepted conditions and the more that they affect your lifestyle, then the greater the amount of PI compensation you will be entitled to receive.

How will my impairment and its effects on my lifestyle be measured?

Your claims assessor in DVA will ask you to see an appropriate medical practitioner to have your level of impairment measured. The assessing medical practitioner will ask you questions about how your accepted conditions affect your day to day functioning and/or measure the limitations on your normal functioning.

The assessing medical practitioner will then send this information to DVA. This information will then be used by your claims assessor to calculate your overall percentage of impairment due to all of your accepted conditions using the relevant tables in the Guide to Determining Impairment and Compensation (GARP M).

For psychiatric conditions, your assessment may be conducted by your treating psychiatrist, or if you do not have a treating psychiatrist, DVA will make an appointment with an appropriate medico-legal assessor for you. Your psychiatrist or the assessor will ask you questions about how your psychiatric condition affects you in your daily life and this information will be used by your claims assessor to calculate the total impairment due to your accepted psychiatric condition.

Your claims assessor will also ask you to complete a Lifestyle Questionnaire. Using the information that you provide on the form and the relevant tables in GARP M, your claims assessor will calculate a rating in accordance with the effects of your accepted conditions on your lifestyle.

If you are entitled to receive interim PI compensation due to a condition which has not stabilised, your lifestyle rating will be based on your interim impairment rating. Your interim compensation will be reassessed once all of your accepted conditions have stabilised. You may be entitled to an additional compensation payment at this stage.

What is the minimum level of impairment I must have before I can receive PI compensation?

To be eligible for PI compensation, the impairment from your accepted conditions must be assessed at 10 impairment points or more; except in the case of hearing loss, loss of fingers or toes, and loss of taste or smell, where only 5 impairment points are required.

How much PI compensation will I receive?

PI periodical payments are calculated by multiplying the maximum weekly rate of PI compensation by the relevant compensation factor. Compensation factors for all combinations of impairment and lifestyle points are set out in GARP M. Different factors apply to warlike/non-warlike service compared to peacetime service (see the table below).

If you do not have an accepted condition under either the Veterans’ Entitlements Act 1986 (VEA) and/or the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) and your impairment is assessed at 80 or more impairment points you will be entitled to maximum PI compensation (adjusted for age if taken as a lump sum), irrespective of the type of service causing your impairment. If you are assessed as less than 80 impairment points, you will receive proportionally less than the maximum amount relative to your type of service. The periodic rates of payment are indexed annually.

*Note: -

• The tables above show only the rates for PI periodical payments based on the higher of the compensation factors in the shaded area (expected impairment outcomes) of the relevant GARP M tables and do not show all the possible amounts payable below maximum rate.
• The tables above show the rates for PI periodical payments where a person’s accepted conditions relate to warlike or non-warlike service and those which are related to peacetime service (but not where there is a combination of both).
• The tables above do not show the rates payable for interim compensation, which is calculated with a minimum lifestyle factor.

Can I get an additional payment if I am severely impaired and have dependants?

You may be able to receive an additional tax-free lump sum for each eligible young person who is dependent on you for economic support if you have been:

• assessed at 80 or more impairment points, and 
• paid, or entitled to be paid, PI compensation.

This additional amount is payable for each eligible young person who was dependent on you at the relevant date. 

What is the relevant date?

The relevant date is the later of one of the following:

• the date your impairment is considered to have reached 80 or more impairment points
• if you have a single service-related condition that resulted in you reaching 80 impairment points, the date you lodged your claim for us to determine it as service related (i.e. the date of your liability claim)
• if more than one condition resulted in you reaching 80 impairment points, the date you lodged your most recent liability claim for one of those conditions.

Who is an eligible young person?

Each eligible young person must be dependent on you for economic support and either:

• conceived or born alive on or before the relevant date 
• adopted or have adoption proceedings in place on or before the relevant date.

They must also be either:

• aged under 16 years
• between 16 and 25 years old in full-time education and not working full time. 

How do I apply?

You will need to provide supporting evidence such as birth certificates and proof of their economic dependency on you. 

Please contact your claims assessor to discuss your situation in more detail. 

Can I take action against the Commonwealth for common law damages?

Yes, but only in limited circumstances. If permanent impairment compensation (non-economic loss) becomes payable to you, you will receive a DVA letter asking for you to advise the Department in writing if you intend to institute an action or proceeding against the Commonwealth for damages for that non-economic loss. The amount payable by way of common law in these circumstances is restricted to $110,000 for any non-economic loss. Once you make an election to take action against the Commonwealth permanent impairment compensation is no longer payable.

When DVA advises you of an entitlement to permanent impairment compensation, you will be provided with an election form enabling you to indicate your choice to institute action for damages. Once you receive compensation for a particular injury or disease, you will lose your right to make a common law claim against the Commonwealth for non-economic loss for that injury or disease. Before paying the amount of permanent impairment compensation determined, DVA will make every reasonable attempt to contact you to ensure you are aware of the alternative choice to institute action for damages against the Commonwealth.

For further information in regards to common law action against the Commonwealth and other third parties, please refer to When and how to take legal action for compensation.

How are PI payments made?

If you are entitled to receive PI compensation, it will be paid to you as a fortnightly periodic payment. You can then choose to convert this amount to a lump sum, or to a combination of fortnightly periodic payment and part lump sum depending on the percentage of impairment assessed (see the table below). The decision to receive some or all of your compensation as a lump sum is final and cannot then be reversed or altered at some later stage. This also includes any of your remaining unconverted periodic compensation which cannot subsequently be converted to another lump sum.

How is the lump sum calculated?

The conversion of the weekly amount to a lump sum is based on life expectancy tables provided by the Australian Government Actuary. Age adjustments will not be made for males up to age 30 and females up to age 35. This age difference is due solely to the fact that women live longer than men on a total population basis. After these ages, the lump sum is based on your age next birthday at the time the notice was given to you about the choices. Your claims assessor can provide you with information on how your lump sum payment will be calculated or you can view DVA’s webpage link below for general details: http://clik.dva.gov.au/military-compensation-mrca-manuals-and-resources-library/actuary-tables-used-age-adjusting-lump-sum-payments

What is the time limit for making a choice to convert periodic payments to a lump sum?

You will have six months from the date the offer was made to you to notify the claims assessor of your choice to convert any periodic payment into a lump sum. This time limit can be extended if it is considered there are special circumstances for doing so.

Until a choice is made, periodic payments will continue to be made on a fortnightly basis. These will be subtracted from the lump sum if conversion to a lump sum is chosen.

If a choice is not made within the allowable time period, periodic payments will continue fortnightly and you will no longer have the option to convert the entitlement to a lump sum.

Do I need to seek financial and/or legal advice?

It is not mandatory for you to seek financial and/or legal advice before choosing to convert a periodic payment to a lump sum amount. However, we strongly recommend that you seek financial and legal advice from suitably qualified people if you do not have experience in managing the amount of money being offered to you, particularly where a substantial change in your lifestyle is also involved.

The considerations can vary with different personal circumstances. Some of the matters you should bear in mind are:

• the taxation treatment of the benefits being offered;
• the effect of the benefits being offered on eligibility for income support payments like Centrelink pensions or the VEA service pension; and
• where you have dependants, additional assistance or taxation benefits may be available through DVA or Centrelink;

Your own commitments, existing assets and lifestyle, including the impact the impairment may have on your lifestyle, are critical to planning for the future and you should begin to think these through before you consult an adviser.

Do I have to pay for the financial and legal advice?

If you are awarded PI compensation at or above 50 impairment points, reimbursement is available from DVA for payments for advice from a suitably qualified financial adviser and lawyer. The payment is intended to enable you to obtain advice on which payment option best suits your individual circumstances, i.e. an ongoing periodic payment of a lump sum amount. The cost of advice about previous investments or advice on management of investments cannot be reimbursed. In addition, legal advice is not intended to cover other legal matters such as family court disputes.

You can get a second opinion if you are not happy with the initial advice you receive, but a limit applies to the amount of financial and legal assistance you may receive for financial and legal advice relating to any one payment choice, see Compensation payment rates for MRCA for the current maximum amount. Any amount over this limit cannot be reimbursed.

How do I find a qualified financial advisor and practising lawyer?

DVA does not recommend or endorse any particular financial adviser or lawyer. Who you choose to advise you is an entirely personal matter. However, to be eligible for assistance with the cost of the financial and legal advice, the financial adviser and lawyer must be suitably qualified. This requirement is intended to ensure that accurate and professional advice is given to you.

A financial adviser employed by an organisation that holds an Australian Financial Services (AFS) licence is accepted as a suitably qualified person. The Australian Securities and Investment Commission (ASIC) MoneySmart website has a register of financial advisors who hold an AFS licence. You can contact ASIC be telephone 1300 300 630 or visit www.moneysmart.gov.au

The Centrelink Financial Information Service (FIS) is a free, confidential service that provides education and information on financial issues to all Australians. A FIS officer may help you to understand how compensation impacts your circumstances. More information can be found at www.servicesaustralia.gov.au/fis or over the phone on 132 300 and say ‘Financial Information Service’ when prompted.

A practising lawyer means a person who is admitted to the legal profession by a Federal Court or Supreme Court of a state or territory and holds a practising certificate entitling the person to practise that profession. To find a lawyer in your area, please refer to the Australian Lawyers Directory https://www.australianlawyersdirectory.com.au/

Does my payment choice affect any other payments made under the MRCA?

The only MRCA payment affected by your choice is the bereavement payment made to a wholly dependent partner or an eligible young person on your death. The bereavement payment is equal to twelve times the weekly rate of PI periodic payments a member was receiving or entitled to receive. Lump sum PI payments do not attract a bereavement payment as they were paid out before death.

What is the taxation treatment of PI payments?

PI payments, whether taken as a lump sum or as periodic payments, are tax-free. For further information, please contact the Australian Taxation Office.

How do I make a claim?

Normally your entitlement for PI payments will be considered during the needs assessments carried out after DVA accepts liability for your conditions (that is, after your conditions are determined to be causally related to your MRCA service), or at other times as your circumstances change.

For further information about needs assessments, please see Needs assessment.

Will I be able to get any increase in my PI compensation if my condition worsens?

Yes. If your accepted condition/s worsen, or if you have other conditions accepted which also cause a degree of permanent impairment, you will be able to lodge a claim for additional PI compensation. Additional PI compensation can be paid where your impairment has increased by at least 5 impairment points.

What if I am already receiving (or have previously received) compensation under another Act?

You may be eligible to receive compensation under the MRCA despite the fact that you may have received (or continue to receive) payments under either the VEA or the DRCA.

In working out the amount of MRCA PI payable to you, “offsetting” calculations are performed to ensure that you are not being compensated more than once for the effects of the same condition/impairment. In certain circumstances, a lump sum payment received under the DRCA needs to be converted to its weekly payment equivalent for calculation of PI compensation using Tables provided by the Australian Government Actuary.

Will PI payments affect my service pension or income support supplement (ISS)?

PI compensation, whether periodic or lump sum is not counted as income for service pension or ISS purposes. However, if you are seeking a service pension or ISS under the financial hardship rules, any periodic PI compensation will be counted as income in determining if the financial hardship rules apply.

If you choose to convert all or part of your PI payments to a lump sum, income will be deemed and will count as income for service pension or ISS purposes. Depending upon your other income, this may have an impact on the rate of service pension or ISS paid to you. The lump sum will be counted as an asset for assets test purposes.

Will PI payments affect my Centrelink payments?

Pl compensation is not counted as income by Centrelink under social security legislation.

However, Pl compensation may be included in an assessment of your assets which can affect some Centrelink payments. We recommend that you contact Centrelink on 1800 777 653 and ask for the Compensation Recovery Team who can tell you how PI compensation may affect your Centrelink payments.

Family tax benefit and the level of child support you receive, or are required to pay, may also be affected by the receipt of Pl payments. Please contact Centrelink for advice on this.