{"id":"F2017L00644","name":"Social Security (Exempt Lump Sums – Payments Compensatory in Nature for Non-Economic Loss) Determination 2017","slug":"social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":96418,"registerId":"commonwealth-F2017L00644-current","compilationNumber":null,"startDate":"2026-04-02","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"3","sectionType":"section","heading":"Authority","content":"#### 3 Authority\n\n  This instrument is made under paragraph 8(11)(d) of the Social Security Act 1991.\n\n4 Definitions\n\n> Note: A number of expressions used in this instrument are defined in the Act, including the following:\n\n    (a) adopted child;\n    (b) Australia;\n    (c) child;\n    (d) parent;\n    (e) sibling;\n    (f) step‑child;\n    (g) step‑parent;\n    (h) superannuation fund.\n  In this instrument:\n\n> Act means the Social Security Act 1991.\n\n> close relative, of a person, means:\n\n    (a) a partner; or\n    (b) a parent, including a step‑parent, foster parent or adoptive parent; or\n    (c) a child, including a step‑child, foster child or adopted child; or\n    (d) a sibling, including a foster‑brother or foster‑sister of the person.\n\n> misconduct means fraud, negligence, default, breach of trust, breach of duty or any other misconduct in the course of duty.\n\n> trustee has the same meaning as in the Income Tax Assessment Act 1997.","sortOrder":0},{"sectionNumber":"5","sectionType":"section","heading":"Exempt lump sum","content":"#### 5 Exempt lump sum\n\n  (1) Subject to subsection (2), for the purposes of paragraph 8(11)(d) of the Act, the gross amount of a payment covered by subsection (3) or another provision of this instrument:\n    (a) is an exempt lump sum; and\n    (b) unless paragraph (c) applies—is reduced to the extent that the payment represents:\n    (i) lost earnings or lost capacity to earn; or\n    (ii) a lump sum calculated at a particular rate over a particular period, instead of periodic payments for the same period; and\n    (c) if:\n    (i) the payment to any extent represents the settlement of a claim relating wholly or partly to economic loss (whether the settlement is by consent judgment or otherwise, and whether or not the settlement is accompanied by an admission of liability); and\n    (ii) the settlement does not identify a component for lost earnings or lost capacity to earn; and\n    (iii) the settlement does not represent a lump sum calculated at a particular rate over a particular period, instead of periodic payments for the same period;\n    is reduced by an amount equal to 50% of so much of the payment as represents that settlement.\n  (2) The gross amount of a payment covered by section 7 is an exempt lump sum, and is not reduced under paragraph (1)(b) or paragraph (1)(c).\n  (3) For the purposes of subsection (1), this subsection covers the following payments:\n    (a) a payment made under the law of the Commonwealth, or a State or Territory, for a personal injury suffered, or a disease or condition contracted, as a result of the commission of an offence;\n    (b) a payment made on the death of a close relative for pain and suffering, or expenses related to the relative’s medical treatment or funeral:\n    (i) under the law of the Commonwealth, or a State or a Territory; or\n    (ii) in accordance with an international agreement to which Australia is a party that applies to air travel;\n    (c) a payment made under the law of the Commonwealth, or a State or Territory, for discrimination, harassment, a breach of human rights or breach of privacy;\n    (d) a payment of compensation made under the Fair Work Act 2009 in respect of non‑economic loss, other than compensation paid to a person for being unfairly dismissed (within the meaning of that Act);\n    (e) any of the following payments in respect of loss as a result of misconduct in the provision of professional services:\n    (i) a payment of compensation;\n    (ii) a payment under an insurance scheme that applies to particular professional services;\n    (iii) the settlement of a claim for damages (whether or not accompanied by an admission of liability).\n  (4) A payment mentioned in paragraph (3)(b) includes a one‑off payment which is more than that prescribed or calculated under the relevant law or in accordance with the relevant international agreement.","sortOrder":1},{"sectionNumber":"6","sectionType":"section","heading":"Payments made on death, medical trauma or medical event","content":"#### 6 Payments made on death, medical trauma or medical event\n\n  For the purposes of section 5, this section covers the following payments:\n    (a) a payment made under a contract of insurance:\n    (i) on the death of a person insured under the contract if a minimum benefit determined under the contract is payable; or\n    (ii) in respect of a medical trauma or medical event specified in the contract;\n    (b) a payment made by a superannuation fund of a death benefit on the death of a fund member to a person nominated or entitled to receive the benefit.","sortOrder":2},{"sectionNumber":"7","sectionType":"section","heading":"Payments under the Military Rehabilitation and Compensation Act 2004","content":"#### 7 Payments under the Military Rehabilitation and Compensation Act 2004\n\n  For the purposes of section 5, this section covers the following payments:\n    (a) a payment made under section 78 or 236 of the Military Rehabilitation and Compensation Act 2004 (which allows compensation to be paid as a lump sum);\n    (b) a payment made under paragraph 234(1)(a) of that Act (which relates to compensation for wholly dependent partners);\n    (c) a payment under paragraph 234(1)(b) of that Act (which also relates to compensation for wholly dependent partners) of a lump sum to a person who has chosen under section 236 of that Act to convert some or all of the weekly amount mentioned in that paragraph to a lump sum;\n    (d) a payment made under section 251 or 255 of that Act (which relate to compensation for eligible young persons);\n    (e) a payment made under section 262 of that Act (which relates to lump sum compensation for dependants).","sortOrder":3},{"sectionNumber":"8","sectionType":"section","heading":"Payments under the Safety, Rehabilitation and Compensation Act 1988","content":"#### 8 Payments under the Safety, Rehabilitation and Compensation Act 1988\n\n  For the purposes of section 5, this section covers the following payments:\n    (a) a payment made under subsection 17(3) or (4) of the Safety, Rehabilitation and Compensation Act 1988 (which relate to compensation for dependents);\n    (b) a payment made under section 18 of that Act (which relates to compensation in respect of funeral expenses);\n    (c) a payment made under section 24 of that Act (which relates to compensation for injuries resulting in permanent impairment);\n    (d) a payment made under section 25 of that Act (which relates to an interim payment of compensation for injuries resulting in permanent impairment);\n    (e) a payment made under section 27 of that Act (which relates to compensation for non‑economic loss).","sortOrder":4},{"sectionNumber":"8A","sectionType":"section","heading":"Payments under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988","content":"#### 8A Payments under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988\n\n  For the purposes of section 5, this section covers the following payments:\n    (a) a payment made under subsection 17(3) or (4) of the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (which relate to compensation for dependants);\n    (b) a payment made under section 18 of that Act (which relates to compensation in respect of funeral expenses);\n    (c) a payment made under section 24 of that Act (which relates to compensation for injuries resulting in permanent impairment);\n    (d) a payment made under section 25 of that Act (which relates to an interim payment of compensation for injuries resulting in permanent impairment);\n    (e) a payment made under section 27 of that Act (which relates to compensation for non‑economic loss).","sortOrder":5},{"sectionNumber":"9","sectionType":"section","heading":"Payments under the Defence Determination 2016/19, Conditions of service","content":"#### 9 Payments under the Defence Determination 2016/19, Conditions of service\n\n  For the purposes of section 5, this section covers the following payments:\n    (a) a payment made under Division 2 (additional death benefit) of Part 2 of Chapter 11 of the Defence Determination 2016/19, Conditions of service;\n    (b) a payment made under Division 3 (severe injury adjustment) of that Part.\n\n> Note: The Defence Determination 2016/19, Conditions of service could in 2017 be viewed on the Federal Register of Legislation website (https://www.legislation.gov.au).","sortOrder":6},{"sectionNumber":"10","sectionType":"section","heading":"Payments relating to personal injuries etc.","content":"#### 10 Payments relating to personal injuries etc.\n\n  (1) Subject to subsection (2) of this section and for the purposes of section 5, this section covers a payment, made in Australia, that:\n    (a) relates to:\n    (i) a personal injury, disease or condition; or\n    (ii) a medical procedure; and\n    (b) is:\n    (i) a payment of damages; or\n    (ii) a payment under an insurance or compensation scheme set out under a law of the Commonwealth, or a State or a Territory, including a payment made under a contract entered into under such a scheme; or\n    (iii) the settlement of a claim for damages (whether or not accompanied by an admission of liability); or\n    (iv) a payment in the nature of compensation or damages.\n  (2) Subsection (1) does not cover the following payments (however described in a relevant policy document);\n    (a) an income protection payment;\n    (b) a total and permanent disability or incapacity payment;\n    (c) a total and temporary disability payment;\n    (d) a permanent and partial disability payment;\n  that are paid as a lump sum under:\n    (e) a sickness or accident insurance policy; or\n    (f) a group insurance policy arranged by the trustees of a superannuation fund.","sortOrder":7}],"analysis":{"flash_summary":{"complexity_score":7,"scope_assessment":{"changed":false,"description":"This instrument does not amend the Social Security Act itself but exercises the power given by paragraph 8(11)(d) of the Act to declare which lump-sum payments are treated as exempt for social security purposes (section 3). Its effect is to specify categories of compensatory payments that are exempt and to set rules for reducing those exemptions in particular circumstances (section 5), rather than to expand or narrow the Act's legislative grant of power. The instrument therefore clarifies and implements the Act's exemption mechanism by listing covered payment sources (sections 5(3), 6–10) and identifying exclusions (section 10(2)), rather than changing the statutory scope of the enabling provision."},"complexity_factors":["Multiple cross-references to other statutes and instruments (Social Security Act 1991, Fair Work Act 2009, Military Rehabilitation and Compensation Act 2004, Safety, Rehabilitation and Compensation Acts, Defence Determination) increasing legal interdependence (sections 3, 5(3), 7–9).","Different categories of covered payments with distinct rules (statutory compensation, insurance payouts, superannuation death benefits, settlements) requiring source-specific treatment (sections 5(3), 6–10).","Reduction and apportionment rules that require factual and evidential determinations (identification of lost earnings, substitution for periodic payments, 50% reduction for unidentified economic-loss settlements) creating interpretive complexity (section 5(1)(b)–(c)).","Exclusions and carve-outs that require distinguishing similar payments (e.g. lump-sum income-protection or total-and-permanent-disability payments excluded from section 10(1)) (section 10(2)).","Administrative discretion and potential for disputes in classifying mixed-purpose settlements and in applying the 50% rule (section 5(1)(c)).","Definitions and embedded legal terms (eg. 'close relative', 'misconduct', 'trustee') that interact with substantive provisions and external legislation (section 4).","Overlap between private‑law settlements and statutory schemes that requires cross-system coordination (sections 5, 10)."],"plain_english_summary":"What this instrument does (mechanically)\n\n- This instrument, made under paragraph 8(11)(d) of the Social Security Act 1991 (section 3), lists particular lump-sum payments that are to be treated as \"exempt lump sums\" for the purposes of the Act (section 5).  \n- It specifies how to calculate those exemptions: the gross amount of a covered payment is an exempt lump sum, but the exempt amount is reduced to the extent the payment represents lost earnings or lost earning capacity, or is a lump sum that substitutes for periodic payments (section 5(1)(a)–(b)).  \n- If a settlement covers economic loss but does not identify lost-earnings components or a substitution for periodic payments, 50% of the settlement amount that represents that economic-loss settlement is not exempt (section 5(1)(c)).  \n- The instrument then lists, by source, the kinds of payments that qualify as covered payments — for example, payments under Commonwealth, State or Territory law for personal injury caused by an offence (section 5(3)(a)); death-related payments for pain and suffering or medical/funeral expenses (section 5(3)(b)); payments for discrimination, harassment, human rights or privacy breaches (section 5(3)(c)); certain Fair Work Act 2009 non-economic loss compensation (section 5(3)(d)); and payments for loss due to professional‑services misconduct (section 5(3)(e)).  \n- Separate clauses make clear that specified insurance payouts and superannuation death benefits (section 6), a range of military compensation and dependants’ lump sums (section 7), workers’ compensation and related statutory payments (section 8 and 8A), Defence Determination payments (section 9), and broader personal‑injury or medical‑procedure damages and settlements (section 10) are covered, subject to enumerated exclusions (see section 10(2)).  \n\nStated purpose and how the instrument works against that purpose\n\n- The instrument’s effect is to exclude (or partially exclude) certain lump-sum compensatory payments from social security means‑testing by declaring them \"exempt lump sums\" (section 5).  This is the mechanical outcome of the instrument.  \n- The claimed policy rationale (as expressed by the form and structure of the instrument) is to treat payments that are compensatory in nature for non‑economic loss differently from ordinary income or assets — by making those sums exempt for social security purposes (see section 5 and the categories listed in sections 5(3), 6–10).  \n\nPractical implications, incentives and trade‑offs (mechanisms, with section references)\n\n- Who pays: the instrument changes how recipients’ lump sums interact with social security assessment rules; it does not itself create or fund payments. The fiscal or benefit cost consequences of exempting parts of lump sums are borne by the social security system (section 5).  \n- Who decides and where discretion lies: decision‑makers must determine whether a payment \"represents\" lost earnings or lost capacity to earn, whether it is a lump-sum substitute for periodic payments, or whether a settlement \"identifies a component\" for lost earnings (section 5(1)(b)–(c)). Those factual and evidential judgments create administrative discretion.  \n- Compliance and evidentiary burden: recipients, payers (insurers, trustees, scheme administrators) and officials will need documentation showing the nature of the payment and, where relevant, whether a settlement identifies components for economic loss or substitutes for periodic payments (sections 5(1)(b)–(c), 10(1)).  \n- Structuring and private behaviour: because the exemption depends on how a payment is described and apportioned (e.g. explicit identification of lost‑earnings components or whether a payment substitutes for periodic payments), parties to settlements, insurers and trustees have an incentive to structure or label payments in ways that affect social security treatment (section 5(1)(b)–(c); section 10).  \n- Substitution effects: the instrument treats lump sums that are substitutes for periodic payments differently from lump sums compensating non‑economic loss (section 5(1)(b)). That creates a specific mechanical difference between receiving periodic payments and a lump-sum conversion of those payments.  \n- Scope limits and exclusions: the instrument excludes certain lump-sum disability or income-protection style payments from being covered by section 10 (see section 10(2)(a)–(d) and 10(2)(e)–(f)). Those exclusions require administrators to distinguish between compensation for non‑economic loss and insurance-style or superannuation group insurance payouts.  \n- Concentrated benefits and diffuse costs: the direct benefit of exemption accrues to recipients of qualifying compensatory payments (sections 5, 6–10). The administrative and fiscal consequences are spread across the social security system and its funders.  \n- Implementation risk: applying the 50% reduction rule for unidentified economic-loss settlements (section 5(1)(c)) and parsing mixed-purpose settlements (sections 5 and 10) could generate disputes, need consistent guidance, and raise review or appeal activity.  \n\nEffects on markets and private choice (mechanisms to watch)\n\n- Insurance, litigation and settlement practice: because the exemption depends on payment characterisation and apportionment (section 5(1)(b)–(c)), insurers, plaintiffs, defendants and trustees may change how they document settlements or structure payouts to affect claimants’ social security assessment.  \n- Superannuation and trustee decisions: death benefits paid by superannuation funds are explicitly covered when paid to nominated or entitled persons (section 6(b)), so trustees and beneficiaries will need to consider social security interactions when deciding on lump‑sum arrangements.  \n\nNet mechanical summary\n\n- The instrument prescribes which lump‑sum compensatory payments are treated as \"exempt lump sums\" for social security purposes and sets rules for reducing the exempt amount where amounts represent lost earnings, substitute lump sums, or unidentified economic loss (sections 3–5). It enumerates numerous statutory and contractual payment sources that are covered (sections 5(3), 6–10) and specifies certain exclusions (section 10(2))."},"kimi_summary":{"content_quality":"ok","complexity_score":5,"scope_assessment":{"changed":false,"description":"The legislation appears focused on its original purpose of specifying exempt lump sums for social security purposes. While it covers multiple payment types across various schemes (military, workers compensation, insurance, discrimination), this breadth appears to be the intended scope rather than scope creep. The instrument is a determination under a specific paragraph of the Social Security Act, maintaining its original legislative purpose."},"complexity_factors":["Multiple nested conditions in section 5(1) with three-tier structure (general rule, reduction rule, special settlement rule)","Cross-references to 6 other Acts (Social Security Act 1991, Military Rehabilitation and Compensation Act 2004, Safety, Rehabilitation and Compensation Act 1988, Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988, Fair Work Act 2009, Income Tax Assessment Act 1997)","8 defined terms in the instrument plus reliance on Act definitions","Mirror provisions for Defence-related Claims Act (section 8A duplicates section 8 structure)","Exception to exception structure in section 10 (general coverage then specific exclusions)","Complex reduction formula in section 5(1)(c) requiring assessment of settlement characteristics"],"plain_english_summary":"This law sets out which lump sum payments count as **'exempt lump sums'** for Centrelink purposes. In plain English, it tells Centrelink when to ignore certain one-off payments so they don't reduce someone's pension or benefit.\n\n**What it does:**\nNormally, if you receive a lump sum payment, Centrelink treats it as income or assets and may reduce your payments. This law creates exceptions for payments that compensate people for **non-economic loss** — things like pain and suffering, discrimination, or the death of a family member — rather than replacing lost wages.\n\n**Who it affects:**\n- People receiving Centrelink payments who get lump sum compensation\n- Victims of crime, discrimination, or medical negligence\n- Families of deceased workers (including military personnel)\n- People receiving insurance payouts for death or medical trauma\n\n**Key rules:**\n- **Generally exempt:** Payments for personal injury from crime, discrimination, harassment, breach of privacy, or professional misconduct\n- **Generally exempt:** Death benefits from insurance, superannuation, or workers' compensation schemes\n- **Generally exempt:** Military compensation lump sums\n- **Reduced (not fully exempt):** If a payment includes compensation for lost earnings or lost capacity to earn, that portion is **not** exempt and will affect Centrelink payments\n- **Special rule:** If a settlement covers economic loss but doesn't specify how much is for lost earnings, Centrelink assumes 50% of that settlement amount counts against you\n\n**Why it matters:**\nThis protects vulnerable people who receive compensation for serious harm from having their Centrelink payments cut, while ensuring that payments replacing lost wages are still assessed normally."}},"importantCases":[],"_links":{"self":"/api/acts/social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination","history":"/api/acts/social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination/history","analysis":"/api/acts/social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination/analysis","conflicts":"/api/acts/social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination/conflicts","importantCases":"/api/acts/social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination/important-cases","documents":"/api/acts/social-security-exempt-lump-sums-payments-compensatory-in-nature-for-non-economic-loss-determination/documents"}}