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Program 1.7: Adjustment to the Military Rehabilitation and Compensation Acts Liability Provision—Income Support and Compensation

Description

Program 1.7 provides an updated actuarial assessment of the movement in the liability for income support and compensation under the Safety, Rehabilitation and Compensation Act 1988 (SRCA) and the Military Rehabilitation and Compensation Act 2004 (MRCA).

Delivery

This program represents the movement in the long-term liability based on the advice of the Australian Government Actuary. The movement is recognised as an expense in DVA's financial statements. Due to the nature of the provision, significant adjustments can occur between years. Movement for the liability for the past two years is shown in Table 15.

Table 15—Movement in SRCA and MRCA liability under Outcome 1 for 2015-16 and 2016-17
  2015-16 2016-17
SRCA
($m)
MRCA
($m)
Total
($m)
SRCA
($m)
MRCA
($m)
Total
($m)
Actuarial changes in provisions -12.8 125.2 112.4 24.1 532.7 556.8
Permanent impairment -33.5 275.3 241.8 -42.0 76.8 34.8
Benefits for eligible dependants -14.4 3.2 -11.2 -14.7 3.9 -10.8
Income maintenance payments -50.7 237.3 186.6 0.0 306.4 306.4
Incapacity payments -3.2 0.0 -3.2 -54.1 0.0 -54.1
Medical exams -0.2 11.9 11.7 -2.9 17.5 14.6
Other -2.3 3.3 1.0 -3.1 6.1 3.0
Interest rate 237.7 627.8 865.5 -103.6 -385.6 -489.2
Total expenses 120.6 1,284.0 1,404.6 -196.3 557.8 361.5

MRCA = Military Rehabilitation and Compensation Act 2004, SRCA = Safety, Rehabilitation and Compensation Act 1988

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Report on performance

The Department's provision for compensation-related payments increased from $6.7 billion in 2015–16 to $7.1 billion in 2016–17.

This provision recognises the obligations that the Department has to veterans and current serving military personnel for benefit payments that will occur in the future.

After a long period of predominantly peacetime service, the ADF has undertaken a range of extensive and intensive operations since 1999 that have involved significant numbers of servicemen and servicewomen. Deployments of both permanent and reserve forces have exposed an increasing number of ADF personnel to risks of injury and death, and the Government to an increasing liability for future costs of rehabilitation, health care and compensation.

It is important to note that the provision takes into account personal benefits and health care for clients over the next 50 years or more. It is expected that the estimate will be adjusted each year as claims are received and additional information about claims patterns becomes available.

The increase in 2016–17 primarily resulted from increases in permanent impairment claims and incapacity payments. Expenditure has grown substantially over the last few years, driven primarily by increases in the number of claimants.

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