The Applicant seeks review of a Centrelink decision dated 4 November 2024 to cancel his disability support pension (DSP) on the basis of a compensation preclusion period from 7 October 2024 to 15 December 2024. Centrelink also recovered a charge amount of $1,563.37 representing DSP paid from the start of the preclusion period on 7 October 2024 to the date of cancellation.
The preclusion period and cancellation decisions have been affirmed by an authorised review officer and this Tribunal (differently constituted) on first review.
I conducted a hearing by telephone on 28 January 2026. The Applicant gave evidence and made submissions. He was supported by Ms Singh, who also spoke on his behalf. The Applicant seeks an outcome that he be paid DSP for the preclusion period of 10 weeks. He relies on the special circumstances of his case in seeking this result.
[2]
There is no real dispute about the material facts. In July 2024, the Applicant was performing some part-time work as a carer during which he was assaulted by a client. He made a compensation claim as a result. He was paid periodic workers compensation payments up to 6 October 2024. He alerted Centrelink to the receipt of these payments and his lump sum claim in September 2024. His claim was settled on 30 October 2024 in the sum of $26,380, inclusive of costs.
A few days before settlement, Centrelink had notified the Applicant his DSP might stop if he received a lump sum payment. At about the same time, his solicitors had advised him in writing of the proposed settlement terms and that Centrelink could seek a refund of some social security payments made and he would likely be subject to a preclusion period. The letter stated that Centrelink would "not allow you to seek Centrelink benefits for a period of time".
Centrelink was notified of the settlement details on 30 October 2024. It seems it took a few days to process the information to calculate the preclusion period and any amount to be recovered from the liable insurer. Until these steps were completed, the settlement proceeds could not be paid out by the insurer.
The Applicant contacted Centrelink on 25 and 30 October 2024 to find out whether information had been received from the insurer about the settlement so that Centrelink could issue a release and the nett settlement proceeds could then be paid to him. On both occasions, he was told the information from the insurer had not yet been received.
On 31 October 2024, the Applicant again contacted Centrelink. He was advised the settlement information had been received. He asked for a clearance to issue as soon as possible. He said he was waiting on the funds to buy a car which he needed to start a new job. On 1 November 2024, the Applicant called again and requested urgent processing.
On 4 November 2024, the Applicant was contacted and told of the DSP cancellation decision, the preclusion period and the charge amount recovered from the insurer. Also on 4 November 2024, Centrelink issued a letter to the Applicant confirming the effect of the preclusion period on his payments.
On 7 November 2004, the Applicant spent $16,500 to buy a Renault van in anticipation of starting work as a support worker for an NDIS service provider. He needed a vehicle for this work and it was also suitable for his longer-term aim to do plumbing work. The support worker position did not eventuate; there was a problem with a screening check. This left the Applicant without work or income. He pawned personal possessions to be able to meet his rent. He had to rely on various community support organisations for any assistance they could offer. He had to borrow money from acquaintances who were prepared to help him out. At hearing, the Applicant explained that he was at risk of becoming homeless at this time.
The Applicant reclaimed DSP and payment was made from 16 December 2024. This was a difficult time of year to find work. He managed to get some plumbing work but the position was stressful and ended up only lasting for a couple of weeks.
The Applicant managed to gain work as a security guard in July 2025. At hearing, he said he was still doing this work. He is employed casually, although his hours have been essentially full-time. His recent level of pay was over $3,000 per fortnight.
The Applicant said he lived frugally; he had managed to retrieve the possessions he had pawned and repay those he borrowed money from. He still has the van. His longer-term aim is to start his own plumbing business.
The Applicant gave evidence about his personal history. He has experienced significant mental health issues and associated problems, including homelessness, in the past. He was diagnosed with schizophrenia about 20 years ago. He was using substances and alcohol. He gave up drugs long ago but alcohol abuse continued to be a significant problem for him.
Since 2022, the Applicant has managed to turn his life around. He has not used alcohol for about three years. His current diagnosis is a bipolar condition. He accesses appropriate treatment and his mental state has been stable. He gets some NDIS support. He attends Alcoholics Anonymous and Narcotics Anonymous as part of his routine to stay well. He sees a psychologist regularly. He eats healthily, has given up smoking and gets proper sleep. He has managed to get paid work periodically and has had steady employment since July 2025.
The Applicant explained that he is always looking for ways to improve his circumstances. He thought he had secure work lined up in October 2024 but needed a vehicle for the support worker role. He identified the van he ultimately purchased as suitable, both short and longer term. He had looked around and it was a good buy in the Darwin market.
He wanted the settlement proceeds as soon as possible to be able to pay for the van. He accepted he knew of the preclusion period by 4 November 2024 at the latest. However, his aim then was to buy the van, start the new job and he hoped to be off Centrelink payments entirely after this. He bought the van on 7 November 2024. It was after this that he was informed about the screening issue and that this put an end to this work opportunity.
This was a very stressful time. He was in real hardship with no money, no work and no income. He did not consider trying to sell the van he had just purchased. Public transport in Darwin was inadequate and he needed a vehicle to improve his prospects of finding work.
Given his history and extenuating circumstances, the Applicant asked for special consideration. He considered he was deserving of the support he sought.
[3]
Although the Applicant did not challenge the preclusion period as calculated, it is appropriate that I consider this aspect first.
The settlement sum of $26,380 was within the definition of "compensation" under subsection 17(2) of the Social Security Act 1991 (Act), since this sum was at least partly in respect of lost earnings or lost capacity to earn. The Applicant's entitlement to the settlement proceeds gave rise to a lump sum preclusion period under the Act. The length of the preclusion period was calculated by taking 50% of the gross settlement sum, which then had to be divided by the relevant income cut-out amount: subsections 17(3) and 1170(4) of the Act. This calculation resulted in a number of weeks during which compensated affected payments such as DSP were not payable. Here the calculations were $26,380 x 50% = $13,190 which amount was then divided by $1,250.40, resulting in a preclusion period of 10 weeks (rounded down). Since the Applicant had received periodic workers' compensation payments prior to the settlement, the preclusion period started on the day after the last day in respect of which he was paid periodic workers compensation: subsection 1170(1) of the Act. I am satisfied that the preclusion period starting on 7 October 2024 and finishing on 15 December 2024 was correctly calculated.
It is useful to observe that the policy underlying the preclusion regime in the Act is that, where a person receives a lump sum compensation payment relating to economic loss, it is reasonable to expect that they should use part of those funds to provide for themselves before seeking recourse to the public purse via social security income support payments. In a case of settlement of a claim for compensation or damages, the Act fixes on 50% of the lump sum amount as the starting point in the preclusion period calculations. Previously, decision-makers had to assess the actual economic loss component of an individual settlement. This approach became open to manipulation, with economic loss amounts being artificially reduced and other heads of damage correspondingly increased, resulting in inappropriately early access to social security payments for many claimants. The "50% rule" now in the Act was introduced to overcome this problem. It follows it is not appropriate to go behind the 50% rule to attempt to ascertain the actual amount of economic loss in a particular settlement: Secretary, Department of Family and Community Services vChamberlain[2002] FCA 67.
The effect of the preclusion period regime is to deem an income stream during this period, sourced from the compensation lump sum, at the weekly rate of the relevant divisor, during which period social security payments are not payable. This approach operates to avoid what is often referred to as "double-dipping", in terms of accessing funds both from the payer of the compensation lump sum and the public purse, in respect of the period of time covered by the preclusion period.
The real issue in this case is whether I should exercise the discretion in section 1184K of the Act and, if so, to what extent. Subsection 1184K(1) provides:
[4]
(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
[5]
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
[6]
Before it is open to exercise the discretion to treat some or all of the Applicant's settlement sum as having not been made, I have to consider whether there are special circumstances in his case. In this respect, I have to consider, given the evident policy rationale underpinning the compensation preclusion regime, whether here are features in his case which would make strict application of the preclusion period unfair or unjust.
[7]
In my view, the Applicant has made considerable and positive changes to his lifestyle and outlook, against a very difficult background history. The changes he has made, reflected in his stable mental state, healthy lifestyle, steady employment and future prospects, are a great credit to him. Any decision I make is not intended to detract from his significant and commendable efforts in this respect.
I accept that the Applicant expected to secure work as an NDIS worker soon after he received his settlements proceeds, which was by 7 November 2024 at the latest. His focus on this work and purchase of the van was understandable in the circumstances. However, his evidence of a history of episodic employment tends to show there was no guarantee as to how things would turn out. Unfortunately, the screening check put an end to this work prospect. I accept this put him in a very difficult and stressful position and that he had to pawn items and borrow funds to try to get through.
At hearing, the Applicant accepted that he had probably not paid enough attention to the preclusion period when told about it on 4 November 2024. He did not consider putting some money aside to see him through until mid-December 2024. When the job fell through, he did not consider selling the van; he might have had to sell at a loss.
It is plainly not the intention of the compensation preclusion regime that a person can acquire assets with their compensation monies and then be paid social security payments for the preclusion period. I note that the Applicant's circumstances have improved since the end of 2024. He now has steady, gainful work. He has managed to recover the possessions he had to pawn. He has repaid those who lent him money. He still retains the van and has plans to start his own plumbing business in the future.
In my view, the Applicant's period of hardship in late 2024 was primarily brought about by his own choice to buy the van, rather than keep some of the settlement proceeds to see him through until the end of the preclusion period. Fortunately, his financial position has improved considerably since then. I am not persuaded that there is any sufficient reason to depart from the usual and intended operation of the compensation preclusion provisions in this case. It follows I do not consider an outcome that would result in him being paid arrears of DSP for the 10-week preclusion period to be appropriate. I find there are no special circumstances in the Applicant's case which would justify treating any of his compensation payment as having not been made.
Subsection 80(1) of the Social Security (Administration) Act 1999 provides that, where a payment such as DSP is no longer payable, a decision to cancel or suspend the payment is required. Given the relatively short period between the cancellation decision on 4 November 2024 and the end of the preclusion period on 15 December 2024, I would have given consideration to whether suspension, rather than cancellation, might have been a preferable decision. However, nothing turns on this now. The decision to cancel the Applicant's DSP was open to be made and I consider it appropriate to affirm that decision in the circumstances.
[8]
Ms K Richardson, Litigation Branch, Services Australia
Legislation Cited (2)
Security (Administration) Act 1999
Security Act 1991
Cases Cited (2)
JKNL and Secretary, Department of Social Services (Social security second review) [2026] ARTA 176 (13 February 2026)
Secretary, Department of Family and Community Services v Chamberlain[2002] FCA 67