Decision: The Tribunal affirms the decision under review.

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 201(1A)-201(1B) of the Social Security (Administration) Act 1999.

SOCIAL SECURITY - disability support pension - cancellation - compensable injury - compensation preclusion period - whether the compensation should be treated as not having been paid - whether there are special circumstances - decision affirmed

Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (Cth)

Social Security Act 1991 (Cth)

Brodley and Secretary, Department of Social Security [1991] AATA 669

G v Minister for Immigration and Border Protection [2018] FCA 1229

Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339

Hollis and Secretary, Department of Employment and Workplace Relations [2006] AATA 4

Ivovic and Director-General of Social Services [1981] AATA 57

JHSJ and Secretary, Department of Social Services (Social security second review) [2025] ARTA 611

Re John Clinton Alver and Secretary, Department of Social Security [1992] AATA 333

Massoud and Secretary, Department of Social Services (Social services second review) [2017] AATA 1366

Re Domenico Colaiacolo and Secretary, Department of Social Security [1985] AATA 91

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690

Re Groth and Secretary, Department of Social Security [1995] AATA 62

Re Beadle and Director -- General of Social Security [1984] AATA 176

Re Secretary, Department of Social Security and John Rodgers [1992] AATA 131

Secretary, Department of Social Security v Hales [1998] FCA 210

Watsemawa and Secretary, Department of Education, Employment and Workplace Relations [2010] AAT 1028

1. The decision under review is a decision to cancel Ms LVJJ's disability support pension with effect from 26 March 2019 due to the imposition of a compensation preclusion period.
2. Ms LVJJ was injured in 2011 following medical treatment. On 9 August 2024, Ms LVJJ settled a common law compensation claim in the sum of $2,025,000. On 14 August 2024 Ms LVJJ provided a Compensation Advice of Lump Sum Payments form and Deed of Release[1] from the Insurer to the Agency.
3. On 26 August 2024, Services Australia - the Agency (the Agency) wrote to Ms LVJJ to advise her of the decision to cancel her disability support pension from 26 March 2019 and to impose a lump sum compensation preclusion period from 21 April 2011 to 3 March 2027.
4. On 29 August 2024 Ms LVJJ sought internal review of this decision, which was affirmed by an authorised review officer on 12 September 2024. On 3 October 2024, Ms LVJJ applied to the Administrative Appeals Tribunal for an independent review of the decision. From 14 October 2024, the AAT became the Administrative Review Tribunal ('the Tribunal').[2]
5. On 13 December 2024, the Tribunal on first review affirmed the decision of the authorised review officer. Ms LVJJ has then sought second review with the Tribunal.
6. I heard the matter on 18 November 2025 and had before me relevant documents from Ms LVJJ and the Respondent.[3] Ms LVJJ also provided oral evidence at the hearing. The Respondent's representative provided written and oral submissions.
7. For the reasons that follow, the decision under review has been affirmed.

1. The relevant legislation is contained in the Social Security Act 1991 (the Act). Part 3.14 of the Act provides for when certain social security payments are not payable due to an income support recipient receiving compensation.
2. Subsection 1169(1) of the Act provides that certain social security payments - referred to as "compensation affected payments" - are not payable during a "lump sum preclusion period".
3. Subsection 17(1) of the Act defines the term "compensation affected payment" and includes a social security entitlement, such as disability support pension.[4] The term "compensation" is defined in subsection 17(2) of the Act as follows:

17(2) Subject to subsection (2B), for the purposes of this Act, compensation means:

(b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

1. Subsection 17(3) of the Act provides that the "compensation" part of the lump sum compensation payment is either 50% of the payment or "so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn".
2. Subsection 1170(1) of the Act states:

Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:

(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and

(b) ends at the end of the number of weeks worked out under subsections (4) and (5).

1. Subsections 1170(4) and (5) provide a formula for calculating the length of the "lump sum preclusion period". In summary, this is calculated by dividing the "compensation part of the lump sum" by the "income cut-out amount".
2. The 'Income cut-out amount' is defined in subsection 17(1) of the Act which states:

income cut-out amount, in relation to a person who has received a compensation payment, means the amount worked out using the formula in subsection (8), as in force at the time when the compensation was received.

1. Notwithstanding the imposition of a compensation preclusion period, the Act allows for the reduction of the preclusion period by disregarding the whole or part of the compensation payment on the grounds of special circumstances. Section 1184K of the Act provides:

For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

if the Secretary thinks it is appropriate to do so in the special circumstances of the case.

1. The issues which arise in this case are:
   • Whether Ms LVJJ is subject to a preclusion period; and
   • For what period is Ms LVJJ precluded from receiving a compensation affected payment due to the imposition of a compensation preclusion period; and
   • Are there any special circumstances relating to Ms LVJJ such that the whole or part of the lump sum compensation payments should be disregarded?
   • Was Ms LVJJ's disability support pension correctly cancelled?

1. In determining this application, I must first be satisfied that Ms LVJJ is subject to a preclusion period. It was not in dispute that Ms LVJJ was injured as a consequence of medical treatment on 21 April 2011.[5] Also not in dispute was that on 9 August 2024, Ms LVJJ agreed, by way of a signed deed of release and indemnity, to a lump sum payment of $2,025,000 in relation to her compensable injury, which included an amount of $275,000 towards her costs.[6] On 26 August 2024, Ms LVJJ's disability support pension was cancelled due to receiving the lump sum payment.[7]
2. Subsection 17(2) of the Act states that the meaning of compensation is wide and includes a payment for damages, a payment in settlement of a claim for damages and any other compensation or damages payments that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. The information provided to the Agency on 14 August 2024[8] confirms that the payment made to Ms LVJJ included a component for economic loss. Accordingly, the money received by Ms LVJJ is compensation as defined under the Act and Ms LVJJ is subject to a preclusion period.

For what period is Ms LVJJ precluded from receiving a compensation affected payment due to the imposition of a compensation preclusion period?

1. In determining whether Ms LVJJ is precluded from receiving a compensation affected payment, I must be satisfied of the calculation of the compensation preclusion period. As previously stated, subsections 1170(4) and (5) of the Act state that this is calculated by dividing the "compensation part of the lump sum" by the "income cut-out amount".
2. Ms LVJJ's payment of a lump sum compensation payment on 26 August 2024 falls within the definition of compensation within the meaning of the Act. Accordingly, I am satisfied that Ms LVJJ received a lump sum compensation payment of $2,025,000. In Ms LVJJ's case, as no specific amount was awarded for economic loss, pursuant to paragraph 17(3) of the Act, the compensation part of the lump sum is 50% of the total lump sum compensation payment, which is $1,012,500.
3. Accordingly, pursuant to subsection 1169(1) a "compensation affected payment", such as disability support pension, is not payable to Ms LVJJ during the "lump sum preclusion period". The calculation of the start and end dates of the "lump sum preclusion period" is provided for in subsection 1170(1) of the Act.
4. The correct divisor in force at the date of the settlement, on 26 August 2024, was $1,222.30. By dividing 50% of the lump sum compensation payment ($1,012,500) by $1,222.30, the preclusion period is calculated as being, rounded down to the nearest whole number, 828 weeks. I am satisfied that the Agency calculation is correct.
5. Ms LVJJ's compensable injury occurred on 21 April 2011. Accordingly, subsection 1170(3) applies to her circumstances. This means that the "lump sum preclusion period" 'begins on the day on which the loss of earnings or loss of capacity to earn began' - that is, 21 April 2011 and continues for a period of 828 weeks from this date. Therefore, no "compensation affected payment" (such as disability support pension) is payable to Ms LVJJ during the preclusion period.

Are there any reasons why the whole or any part of the compensation payment should be disregarded such that the preclusion period is reduced?

1. The next matter to consider is whether there are special circumstances that would justify disregarding all or part of Ms LVJJ's lump sum compensation payment. Subsection 1184K(1) of the Act gives a discretion to treat all or part of a compensation payment as not having been made, if it is appropriate to do so, in the special circumstances of the case.
2. There is extensive case law on what constitutes "special circumstances". In the Administrative Appeals Tribunal (the AAT) decision of Re Beadle and Director -- General of Social Security [1984] AATA 176 (28 May 1984) Toohey J said that:

An expression such as "special circumstances" is by its very nature incapable of exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether the circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.[9]

1. In Re Groth and Secretary, Department of Social Security [1995] AATA 62 DP Forgie found that:

...It seems to me that the purpose of the provisions is to ensure that a person is not paid from two sources in respect of the same period of time. What are special circumstances must be considered against that background. Therefore, there will be special circumstances if the circumstances are such that it is unreasonable, unjust or inappropriate not to treat the whole or part of a compensation payment as not having been made bearing in mind that the provisions are intended to ensure that a person is not paid from two sources in respect of the same period of time.[10]

1. As submitted by the Respondent, chapter 4.13.4.10 of the Social Security Guide (the Guide) recognises that the special circumstances provisions should not be used to override the basic legislative intention of precluding a person who receives compensation for a loss of income not to also receive income support from the Australian Government in respect of the same period of time.
2. The Guide, at chapter 4.13.4.20, further provides guidance as to the types of factors that might be taken into account when considering whether the discretion should be exercised. It is noted that there is usually not one factor which makes a situation unusual, unforeseen or exceptional, but a combination of factors applying to an individual. I may have regard to the Child Support Guide where relevant. However, I am not bound to follow it.[11]

Ms LVJJ's submissions in relation to special circumstances

1. Ms LVJJ stated that when she received the lump sum compensation, her immediate thought was to save her home. She stated that because of prior financial dealings where she had been defrauded in relation to a property purchase, she was in a precarious situation and was hoping to avoid having her home repossessed. This was a major issue for her because the home had large spaces inside and had been altered to allow her to get around with her scooter. The notion that her home was going to be repossessed was causing a great degree of anxiety.
2. She stated that when the money was paid to her, she felt like she was not in a position to make rational choices, and her only thought was that she had to save her house. She stated that if she were required to sell the house, she would be left without the means to buy another property. She stated that she did not obtain any legal or financial advice and was not thinking about anything other than repaying the mortgage.
3. She stated that her friend organised the loan and he made repayments towards this loan prior to the lump sum settlement. She stated that when the money was received, she paid $1,000,000 into the mortgage on 25 September 2024.[12] In addition to the payment into the mortgage, the council also required her to replace the pool fencing, which cost around $30,000 and had some plumbing repairs completed at the house which cost around $12,000. She also repaid $25,000 to her sister, who had lent her money in relation to another property which was subject to fraud.
4. Ms LVJJ stated that she recalls receiving the letter sent to her by the Agency on 26 August 2024.[13] She stated that she had already paid the money towards her mortgage prior to the letter. Ms LVJJ was referred to her bank statement which showed that the payment was made on 25 September 2024, after the date of the letter. In addition, Ms LVJJ was referred to a conversation with the authorised review officer of the Agency on 12 September 2024 where she was reminded that the lump sum compensation was to support them until the end of the preclusion period. Ms LVJJ stated that she could not recall this conversation.
5. Ms LVJJ stated that due to the property fraud that had previously occurred, she was in financial difficulty. The fraud is currently being investigated. She stated that she was at risk of losing her home and a friend agreed to assist with the repayments on her home for a year in exchange for a half share in the property. The financial documents before me indicate that 22 payments totalling approximately $150,000 were made towards her mortgage.[14] Ms LVJJ also stated that her friend also paid her credit card on a number of occasions prior to her receipt of the lump sum compensation. Ms LVJJ stated that every time she accessed money the loan would go up and this caused her anxiety. She stated that her bank stopped her from making withdrawals because they thought she was being scammed. Ms LVJJ also stated that her friend also questioned her access to the loan.
6. Ms LVJJ confirmed that she kept funds in an account to make repayments towards the loan. I note that a copy of an account provided in this matter shows $144,110.59 in this account as at 20 December 2024.[15] As at 28 March 2025, Ms LVJJ still retained $103,659.09 in this account.[16]

The Respondent's submissions in relation to special circumstances

1. The Respondent in this matter submits that Ms LVJJ's circumstances are not special circumstances and do not warrant treating whole or part of the lump sum compensation payment as not having been made for the following reasons:
   • Ms LVJJ has spent most of the compensation payment on paying her mortgage to reduce interest and prevent repossession of her house.
   • Ms LVJJ is not in financial hardship based on her circumstances.
   • Ms LVJJ's ill health is not special circumstances.
2. Specifically, in relation to the expending of the lump sum compensation funds, the Respondent submits that Ms LVJJ has not adequately explained the expenditure of the lump sum compensation amount. The Respondent submits that Ms LVJJ received $2,025,000, inclusive of $250,000 in costs, according to the compensation payer advice,[17] and that Ms LVJJ received a total of $1,226,176.21 into her bank accounts.[18] The Respondent submits that from these amounts, Ms LVJJ transferred $1,000,000 towards the mortgage on the home. This does not account for all of the funds received.
3. The Respondent further submitted that for financial hardship to qualify as a special circumstance, Ms LVJJ's finances need to be severe or worse than the majority of social security recipients. It must go beyond straitened circumstances and be truly exceptional. The Respondent submits that in considering the exercise of the discretion, financial hardship must go beyond straitened and be truly exceptional. An examination of a person's own contribution to their own state of affairs must be examined.
4. The Respondent submitted that while Ms LVJJ does not want to spend the amount remaining in her account, approximately $103,859.09,[19] Ms LVJJ would be able to meet her weekly mortgage repayments of $800 per week for the remainder of the preclusion period from these funds and still have an amount of around $31,000 available. It was further submitted that Ms LVJJ stated on first review that she had to repay $1,000,000 on her mortgage because she could not keep up with mortgage repayments of $10,000 per month and her house was at risk of repossession. The Respondent disputes these statements, submitting that there was no evidence that the house was at risk of repossession in response to the Agency's request for information. It was submitted that out of the $1,037,266.16[20] received by Ms LVJJ, the mortgage repayments for the period until the end of the preclusion period would have totalled $280,000, therefore she would have had $757,266.16 for her use and benefit. On this basis it was submitted that it was not necessary for Ms LVJJ to expend the $1,000,000 on her mortgage.
5. The Respondent further submits that compensation is not intended to be a nest egg for the future nor act as a windfall, and that people are expected to support themselves with available monies before requesting community support.[21] The Respondent submitted that, consistent with other decisions, the AAT has declined to exercise the discretion where a redraw facility is available.[22] The respondent submits that as Ms LVJJ has a total of $1,156,595.52 in her bank account, including the redraw facility, there is no financial hardship nor are her financial circumstances unusual or uncommon or out of the ordinary to warrant exercise of the discretion under section 1184K of the Act.
6. The Respondent further submits that any hardship is a result of her own choices. The Respondent submits that Ms LVJJ was advised in writing and via telephone discussion on 8 August 2024 and 26 August 2024 that she was not able to receive any income support payments until the end of the preclusion period. Ms LVJJ requested internal review of the decision prior to receipt of the compensation lump sum. Ms LVJJ stated to the authorised review officer that she intended to spend most of the compensation lump sum on her mortgage, and was advised that she was expected to financially support herself until the end of the preclusion period. Notwithstanding this information, it was submitted that Ms LVJJ made a deliberate decision to repay $1,000,000 of her mortgage. It was submitted that to exercise the discretion in favour of Ms LVJJ would frustrate the object and purpose of the compensation preclusion provisions.
7. In respect of her ill health, the Respondent submitted that Ms LVJJ received her lump sum compensation payment in relation to her condition and that the injury that a person received compensation for cannot generally be regarded as a special circumstance.[23] The Respondent further contends that there is no evidence which demonstrates that Ms LVJJ's health is more severe than the majority of people otherwise in receipt of disability support pension.

1. In Secretary, Department of Social Security v Hales [1998] FCA 210, when discussing special circumstances in the context of the wavier provision in paragraph 1237AAD(b) of the Act, it was found that financial hardship is not a mandatory requirement for there to be special circumstances. As French J (as he then was) noted:

The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special. But as a matter of grammar and ordinary logic, the exclusion of financial hardship alone as a special circumstance does not mandate its inclusion in the range of matters constituting such circumstances for the purpose of enlivening the Secretary's discretion.

1. While Hales was referring to special circumstances in the context of waiver of debts under the Act, the considerations are analogous in the context of a preclusion period. Where the application concerns a preclusion period, it should also be considered in light of how the Applicant's hardship has arisen. The law on this point was summarised by the AAT in Brodley and Secretary, Department of Social Security [1991] AATA 669:

In Re Colaiacolo and Secretary, Department of Social Security (Decision No 2109, 24 April 1985), it was stated that the factor of financial hardship alone is not sufficient to amount to special circumstances unless it is 'exceptional'. Such exceptional circumstances were seen to exist in Re Krzywak (supra) where the applicant had no income or savings and had used all her award in repayment of debts incurred prior to settlement.[24]

1. As stated in Ivovic and Director-General of Social Services [1981] AATA 57, the manner in which the hardship arose is also relevant. In Re John Clinton Alver and Secretary, Department of Social Security [1992] AATA 333 the AAT summarised the approach to these considerations:

49. It is also relevant that I should look at the cause behind the applicant's financial difficulties. Previous decisions of the Tribunal (see Re Ivovic and Director-General of Social Services (above), Re Latour and Secretary, Department of Social Security (1988) 16 ALD 279; Re Secretary, Department of Social Security and Rodgers (Decision No. 7911; 23 April 1992) have tended to take a hard line where someone has, through extravagance or thoughtlessness, brought about their own dilemma.

1. In this application, I have considered the manner in which Ms LVJJ's financial hardship has occurred. I am not satisfied that Ms LVJJ's financial circumstances justify a reduction in the preclusion period. Firstly, I am satisfied that Ms LVJJ was aware of the preclusion period and the requirement to utilise the lump sum compensation for the entirety of the preclusion period prior to her payment of $1,000,000 onto her mortgage. Secondly, Ms LVJJ retained $144,110.59 in her bank account on 20 December 2024 and $103,859.09 on 28 March 2025. There is also evidence from her bank accounts that funds were used for discretionary spending, such as cryptocurrency, clothing, jewellery, and beauty treatments.
2. In addition, Ms LVJJ has access to a redraw facility. Ms LVJJ states that she has been prevented from accessing the redraw facility. While no evidence has been provided, Ms LVJJ has indicated that she has a claim in relation to this accident. Given these circumstances, I am not satisfied that Ms LVJJ is presently experiencing financial hardship.
3. I also note that while Ms LVJJ indicated that she could not recall the discussion of the preclusion period with the authorised review officer, it is clear that she was notified of the imposition of the preclusion period in writing by the Agency on 26 August 2024, before her payment towards her mortgage on 12 September 2024.
4. I acknowledge that Ms LVJJ has a range of medical conditions, including PTSD and chronic pain. However, nothing before me indicates that Ms LVJJ's medical conditions are more severe than other cases involving preclusion period considerations. While the consideration of ill health is a factor that can be considered under section 1184K of the Act, as the AAT stated in Massoud and Secretary, Department of Social Services (Social services second review) [2017] AATA 1366:

...The fact that an applicant has been injured and received a compensation payout usually results in that person being in ill health during the preclusion period or immediately thereafter. The various Tribunal determinations focus on the consequences of that ill health in making a determination as to special circumstances. In short ill health is the starting point of the exercise, not the determining factor. Further, it is usually the case when determining that ill health is a special circumstance, the ill health being experienced by an applicant is more severe than the majority of DSP recipients.[25]

1. I have taken into account the above considerations, together with Ms LVJJ's circumstances and medical condition. I am not satisfied that Ms LVJJ's circumstances are such that it is appropriate to reduce any of the preclusion period. As stated above, consideration of financial circumstances must be more than straitened, they need to be exceptional and Ms LVJJ's circumstances are not presently exceptional and indeed were not such at the date of the cancellation of her disability support pension. I am not satisfied that the above combination of factors are such that completing the preclusion period would be unreasonable and inappropriate. Accordingly, I have determined that the evidence does not support the exercise of the discretion under section 1184K of the Act and therefore Ms LVJJ's preclusion period should not be reduced.
2. As I have not exercised the discretion under section 1184K of the Act, and Ms LVJJ was in receipt of disability support pension while subject to a preclusion period, I am satisfied that it was correct for the Agency to cancel her disability support pension with effect from 26 March 2019 due to the imposition of the lump sum compensation preclusion period from 21 April 2011 to 3 March 2027. Given my findings in relation to section 1184K of the Act, I have not considered the compensation charge issued to the insurer to repay the amount of disability support pension paid to Ms LVJJ from 26 March 2019.

[2] Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024, applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal.

[3] Exhibit ART1 documents (53 pages); S1-S13 (1341 pages); A1-A18.

[4] Social security benefit is defined in section 23 of the Act.

[9] [1984] AATA 176 at [12].

[10] [1995] AATA 62 at [41].

[11] Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634; G v Minister for Immigration and Border Protection [2018] FCA 1229.

[21] Watsemawa and Secretary, Department of Education, Employment and Workplace Relations [2010] AAT 1028; JHSJ and Secretary, Department of Social Services (Social security second review) [2025] ARTA 611 at [47].

[22] Hollis and Secretary, Department of Employment and Workplace Relations [2006] AATA 4 at [25].

[23] Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339; also, Re Secretary, Department of Social Security and John Rodgers [1992] AATA 131 and Re Domenico Colaiacolo and Secretary, Department of Social Security [1985] AATA 91.

[24] [1991] AATA 669 at [16] referring to the decision of SM Dwyer in Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690.

[25] [2017] AATA 1366 at [70].