Superannuation and incapacity benefits under the Comcare Scheme

Sections 20 and 21 of the Safety Rehabilitation and Compensation Act (1988) (SRCA) deal with the effect of superannuation on incapacity benefits.  Generally speaking, workers who are in receipt of incapacity or loss of earnings benefits under the SRCA should resist termination or defer resignation because once employment is terminated a worker’s superannuation is “paid out” and even if these payments are rolled over, a worker is deemed to have “received” the lump sum benefit and therefore weekly payments are reduced on the basis of the formula in the Act. (see Archer v Comcare (2000) 101 FCR 30).

The reasoning behind the decision was that the worker has access to the funds for his or her “own purposes including rollover.” This means that for workers below the age of 55, only non-preserved amounts are taken into account because preserved amounts can only be accessed once the worker attains a certain age. The formula also only applies to the employer funded component of the superannuation amount.

This can lead to another problem which is identifying when preserved amounts have been paid at which point the formula will kick in again leading to a further reduction of benefits.  Comcare seeks to ensure notification of preserved benefits being paid by requiring the employee’s superannuation scheme to advise when the employee receives a pension, lump sum or both and by requiring workers in receipt of incapacity benefits to complete periodical review forms. (see Comcare Jurisdictional Policy Advice No 2001/18)

In addition, a worker has little capacity to independently verify an employer’s assertions regarding the “employer funded” component of a superannuation pay out and obviously the higher the so called employer funded component, the greater the reduction in incapacity payments. 

Unfortunately the provisions reducing a worker’s weekly payment also kick in when a worker takes invalidity retirement unless the worker can demonstrate that the payment (TPD) was an insured benefit and that there were no “employer contributions”.

A report following the review of the Comcare scheme in 2013 (http://docs.employment.gov.au/node/31849)  recommended that the provisions which result in reductions in weekly payments on “receipt” of superannuation be removed or at least ameliorated (recommendations 7.5, 7.6 and 7.7). This report was commissioned by the then Labour Government and not surprisingly these recommendations have not been taken up by the Abbott Government.