How we calculate incapacity payments

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This page provides information about the benefits that may be payable under the Military Rehabilitation and Compensation Act 2004 (MRCA) and the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) if you have suffered an injury, disease or illness due to your military service and you are unable to work or have a reduced ability to work.

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What are incapacity benefits?

Incapacity benefits are payments for economic loss due to the inability (or reduced ability) to work because of an injury or disease that has been accepted as service related under the MRCA or DRCA.

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Am I eligible for incapacity benefits?

To be eligible you must be:

  • a current or former Australian Defence Force (ADF) member (Permanent or Reserve Force), a Cadet, officer or instructor of Cadets or a declared member; and
  • have medical certification that you are either totally or partially incapacitated for service or work as a result of a service related injury or disease.
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How are incapacity benefits calculated?

Incapacity benefits represent the difference between your normal earnings and your actual earnings at the time you are incapacitated for service or work.

You are entitled to 100% of the difference between your normal earnings and your actual earnings for your first 45 weeks of incapacity. Thereafter, you will be paid the difference between a percentage of your normal earnings and your actual earnings. The percentage will vary between 75% and 100%, depending on the number of hours you are able to work each week or if you are studying full-time as part of an approved rehabilitation plan. This is known as the stepdown and has the effect of reducing the amount you will receive if you are not working or studying full-time.

Under a pilot running from 1 November 2018 to 30 June 2022, you will be exempt from the stepdown if you are undertaking full-time study as part of your DVA approved rehabilitation program. The exemption will cease once the full-time study element of your DVA approved rehabiliation program is complete, or on 30 June 2022 where your full-time study element continues beyond that date. The pilot will apply to full-time study commencing either before or during the term of the pilot.

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How are my ‘normal earnings’ calculated?

If your injury occurred during service in the Permanent Forces, your normal earnings are based on the ADF salary you were receiving at the time of incapacity.

If your injury occurred during Reserve service, your normal earnings are either:

  • your Reserve ADF earnings plus your civilian earnings; or
  • if you were injured while on continuous full-time service, your normal earnings may be based on your full-time ADF salary.
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How are my ‘actual earnings’ calculated?

Your actual earnings are what you are actually earning in employment. In some cases, actual earnings will be zero.

If you are receiving incapacity payments, you may be expected to participate in a rehabilitation program to increase your capacity for suitable employment (a paid job that is suitable to your skills and level of incapacity). For further information, please see Rehabilitation under MRCA and DRCA.

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What if I am self-employed?

If you are self-employed then your earnings may be assessed by reference to the nature of the work you perform and the cost of employing a person to undertake similar work.

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How long will I receive incapacity benefits for?

You will receive incapacity benefits for as long as:

  • you are incapacitated for service or work; and
  • you participate in your rehabilitation; and
  • your actual earnings are less than your normal earnings; and
  • you are under Age Pension age.

Incapacity benefits are not payable if you are imprisoned.

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Are incapacity benefits taxable?

Incapacity benefits are taxable when the income they are intended to replace is taxable. If the income is non-taxable (for example, part-time reserve earnings and some deployment allowances), the incapacity benefit replacing that income will also be non-taxable.

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I receive superannuation, will this affect my incapacity benefits?

Incapacity benefits are reduced dollar-for-dollar by the Commonwealth-funded portion of any superannuation you receive. The part of your superannuation benefit which is attributable to your own contributions is not taken into account.

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I receive a benefit under the VEA, will this affect my incapacity benefits?

If you receive a benefit under the Veterans’ Entitlements Act 1986 (VEA) for the same injury or disease that is causing your incapacity, your VEA benefit may be offset (reduced). You cannot be compensated twice for the same injury or disease.

Depending on your financial circumstances, you may choose to receive your VEA benefit, without reduction, instead of incapacity payments. You can request in writing to have your incapacity payments ceased (and your VEA benefit will no longer be reduced). If your situation subsequently changes, and you wish to again receive incapacity payments (and a reduced VEA benefit), you can submit a request in writing at any time.

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How do I claim for incapacity benefits?

Your eligibility for incapacity benefits may be identified through an assessment of your needs, initiated by DVA (see Needs Assessment).

You can also claim by completing DVA Form D1360 and returning it to your nearest DVA office.

You will need to support your claim for incapacity benefits with medical evidence stating that you are totally or partially unfit for service or work due to the effects of a service injury, disease or illness.

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