Centrelink. The financial welfare service used by nearly a third of the Australian population.

With so many people receiving benefits, it’s not a shock that one of our most commonly asked questions is ‘how will Centrelink payments affect my compensation claim?’

And it’s a completely understandable question.

If you are currently in receipt of Centrelink benefits and have been injured in a motor vehicle accident, it's important to realise how bringing a claim can impact on your payments.

Where does Centrelink fit into my claim?

Economic loss is a big player in compensation claims. It is essentially compensation for any past losses in your earnings or any expected reduction in earnings in your future that are a direct result of a car accident.

Naturally, you will need to refund Centrelink some of the money that you receive from your compensation payout to make up for the lump sum you are now receiving.

Depending on the compensation amount you receive, you may also be prevented from receiving further Centrelink payments for a period of time in future.

Economic loss represents what an individual loses in wages or the ability to make money in the future.

How much will I owe Centrelink?

Calculating how much you will owe to Centrelink isn't always easy. 

It is a complicated mathematical formula used to determine the amount of any refund from a compensation claim. 

Below is an example of a simplified version to give you an idea for how it works. 

The formula

Essentially, what Centrelink will do is take the total amount of your settlement – say $100,000 – and automatically assume that a certain amount of that is your economic loss (your past and future lost wages).

In this instance, we'll pretend Centrelink assumed $50,000 or 50% of the settlement was economic loss. 

This 50% is called the ‘deeming rule’ and it cannot be challenged, even if your actual figure for economic loss is less than that.

Centrelink then divide this amount by the ‘single income cut-off rate for all pensions’. You don’t need to remember the name, but you do need to remember the rate.


Now we take the deeming rule amount - $50,000 – and divide that by $1012.20.

And we get 49. This result is called the ‘preclusion period’, which is the number of weeks that you are precluded – or prevented – from receiving Centrelink payments.

From the example above, you would have to refund Centrelink for any payments you received from them for 49 weeks from the date of your accident.

The Deeming Rule

This is the amount assumed by Centrelink to be your economic loss from your settlement amount. 

Single income cut-off rate for all pensions

This is the amount that Centrelink will divide the assumed economic loss by. 

Preclusion Period

This is the number of weeks that you are precluded - or prevented - from receiving Centrelink benefits after the accident. 

If your claim settles before the end of the preclusion period, then you will also not be able to receive further payments until the expiry of the preclusion period.

Which payments are affected?

Under the current rules, the following payments may be affected if you receive a compensation pay-out:

  • Age Pension
  • Austudy Payment
  • Carer Payment
  • Energy Supplement
  • Disability Support Pension
  • Education Entry Payment
  • Employment Entry Payment
  • Newstart Allowance
  • Mature Age Allowance
  • Mature Age Partner Allowance
  • Parenting Payment
  • Partner Allowance
  • Pension Supplement
  • Pharmaceutical Allowance
  • Widow Allowance
  • Youth Allowance

What should I do?

If you are receiving Centrelink but wish to bring a claim it’s important to seek advice form a lawyer. 

Our expert compensation lawyers can clarify the impacts a claim may have on your payment and help you to estimate the amount of any refund that may be owed to Centrleink.

Remember, the sooner you take action, the more likely you are to obtain your compensation pay-out in a swift and timely manner.

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