Permanent impairment payments under the DRCA

This page explains the circumstances under which it is possible for DVA to award lump sum compensation under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) for permanent impairment suffered by current and former members of the Australian Defence Force (ADF) who were injured or suffered disease due to their service prior to 1 July 2004.

The DRCA is closed to new claims. Any new claims for rehabilitation and compensation are assessed under the Military Rehabilitation and Compensation Act 2004, irrespective of service or time of injury. This information relates to claims made before 1 July 2026.

What is permanent impairment compensation under the DRCA?

A permanent impairment compensation payment under DRCA is a tax-free lump sum benefit. The current rates for permanent impairment can be found in Compensation payment rates for DRCA and the Defence Act.

It is important to note that the DRCA legislation does not split initial liability and permanent impairment claims into separate steps. Instead, once an initial liability claim is accepted, DVA looks at all relevant compensation payable. This means:

• If you lodge a claim under the DRCA before 1 July 2026 and your condition is accepted as related to your service (either before or after that date), DVA will:
  • assess how much the condition affects your impairment and loss of function, and
  • decide the lump sum compensation you are entitled to for permanent impairment under the DRCA.
• If your condition gets worse, any new claim for increased impairment will be assessed under the MRCA. 

What is permanent impairment and how is it assessed?

Permanent impairment is the effect of injuries or diseases on a part of the body (arms, legs, back etc) or on a bodily system such as the digestive, psychological or reproductive system. Pensions are not paid for such impairments under the DRCA. Compensation is paid in the form of lump sums for the effects of the impairment.

Permanent impairment is assessed in accordance with the ‘Guide to the Assessment of the Degree of Permanent Impairment 2023 (DRCA PI Guide). Almost any impairment can be assessed under the DRCA PI Guide. If it can’t, then the American Medical Association’s Guides are used.

In addition, an amount can be awarded for what is known as ‘non-economic loss’ (NEL) caused by the impairment. NEL is awarded for lifestyle effects such as pain and suffering, loss of enjoyment of life and the loss of previously enjoyed sporting or recreational activities which may not be possible due to the impairment. The amount payable is determined in consultation with the injured member.

Is that all that can be paid in compensation?

No. If the assessed degree of impairment due to specified DRCA injury or disease is at least 80%, the Defence Act 1903 provides for payment of a Severe Injury Adjustment (SIA).

The SIA is paid in addition to the amount payable under the DRCA. It applies to specific injury or disease sustained or suffered on or after 10 June 1997.

A further lump sum is payable for the benefit of each ‘child’ up to the age of 16 years (up to 25 years in the case of a full-time student) who was dependent on the injured member at the time the injury was sustained (or the disease was suffered).

What is the taxation treatment of PI payments?

The lump sum permanent impairment payments under DRCA are tax-free. For further information, please contact the Australian Taxation Office.

What effect does payment of a lump sum have on other DRCA entitlements?

It should be noted that there are ‘offsetting’ provisions to prevent your being compensated under the DRCA and also under the Veterans’ Entitlements Act 1986 (VEA) for the same incapacity or service-related death of a member. Any lump sum you may receive under the DRCA might affect any Disability Compensation Payment or Income Support Pension you receive under the VEA. For further information about offsetting, please see Disability Compensation Payment and compensation offsetting.

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 DVA 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 $177,000 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, you will lose your right to make a common law claim against the Commonwealth for non-economic loss for that injury. Before paying the amount of permanent impairment compensation determined, DVA will make every 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.