Appendix
3
Department
of Veterans’ Affairs—answers to written questions
Schedule 2 of the Veterans’
Entitlements Amendment Bill 2011 clarifies and affirms the policy intention of
the offsetting provisions in the Veterans’ Entitlements Act 1986 (VEA).
The policy intention of the offsetting
provisions has always been to prevent duplicate compensation being paid for the
same incapacity and the policy has consistently been implemented on this basis
for almost 40 years.
The amendments will not and are
not intended to change the operation of the offsetting provisions in any way.
The provisions will operate prospectively, and following the passage of the
legislation, a person whose disability pension is currently being offset by
another payment for the same incapacity will continue to have his or her
pension paid at exactly the same rate, unless there is another reason to change
that rate.
1. Unintended
consequences
1.1 The
RSL has raised concerns about Schedule 2. Could you clarify the following
matters?
Can
you envisage any circumstances under the proposed legislation whereby a veteran
could find him or herself at any time in the future receiving compensation
payments that are not commensurate with his assessed level of incapacity?
Compensation under the VEA
will continue to be commensurate with the assessed level of incapacity as a
minimum. The situation under the current legislation will not change under the
proposed legislation.
It should be noted that it is
currently possible for compensation from another source to be more than
an assessed level of incapacity under the VEA. For example, if a person
receives a compensation payment from another source that exceeds the amount of
the Special Rate of disability pension (the maximum amount of compensation
payable under the VEA). In these circumstances the person’s compensation payment
from the other source will exceed his or her level of incapacity as assessed
under the VEA. This is because the offsetting provisions of the VEA are only
able to take into account compensation payments made under that Act. This will
not change under the proposed legislation.
1.2 Is the
RSL correct in stating that the proposed amendments go 'well beyond' the
original intention in 1973 or even 1994?
No, the amendments do not go
beyond the original intention or content of the 1973 or 1994 legislation. The
original intention referred in the Explanatory Memorandum (EM) is not a
reference to offsetting for pensions paid in respect of different types of
service. It is a reference to the principle that offsetting should ensure that
a person is not compensated twice for the same incapacity, which has been the
policy intention since 1973.
In stating that the “amendments
in the Bill go well beyond the original intention”, the RSL’s submission
misinterprets the explanation of the reason for the amendments provided in the
EM.
The RSL submission correctly recognises that in 1973 compensation coverage
under the Repatriation Act 1920 (the predecessor legislation to the VEA)
was extended to include peacetime service. This creates a system of dual
entitlement with the Compensation (Government Employees Act 1971 -1973
(the predecessor to the SRCA), because that Act also provided compensation
coverage for peacetime service. Offsetting ensured that a person could not be
compensated twice for the same incapacity related to peacetime service under
both Acts.
In 1994, compensation coverage
for peacetime service generally ceased under the VEA. However, compensation
coverage under the SRCA was extended to what is now known as warlike and
non-warlike service (still sometimes called operational service). The VEA was
subsequently amended to allow for offsetting to ensure a person could not be
compensated twice for the same incapacity related to operational service under
both Acts.
As stated above, the original
intention of the legislation in the EM was to offset for the same incapacity.
1.3 Are
you able to explain the concerns raised by the RSL, particularly in the example
it provides to indicate that veterans may be disadvantaged by the proposed
legislation?
Veterans will not be
disadvantaged by the proposed legislation. The Department’s understanding of
the RSL’s concern is it believes the proposed amendments will extend the
offsetting provisions under the VEA and will result in a “double dip discount”
in some cases. This is not the intention of the current or proposed
legislation.
The RSL’s submission to the
Senate Inquiry states that the proposed legislation will require the
Commonwealth to offset an entire compensation payment from another source for a
condition not accepted under the VEA against any disability pension received
under the VEA for a condition accepted under that Act in circumstances where
the non-accepted condition only results in a small overlap in incapacity with
the accepted condition.
This is not the case – the
proposed legislation will ensure that offsetting only same incapacity
continues. This is explained in further detail below at 1.4.
The RSL’s submission also states
that this perceived extended offsetting requirement under the proposed legislation,
in combination with an existing apportionment methodology under Chapter 19 of Guide
to the Assessment of Rates of Veterans’ Pensions Fifth Edition (GARP V),
will result in a “double dip discount” in some cases.
This is not the case. If impairment
from a non-accepted VEA condition is removed from the assessment under Chapter
19, then there will be no overlap in incapacity, and therefore no offsetting.
Therefore, DVA does not agree that the proposed legislation as drafted will
result in a “double dip discount”.
1.4 Can
you see any way to satisfy its concerns?
As stated above, DVA understands
the RSL’s concerns but does believe they are based in fact. The proposed
legislation will simply clarify and affirm the policy intention of the legislation
and does not require a change to the way the offsetting provisions are applied.
The offsetting provisions are
administered with the view not to manufacture an overlap in incapacity.
Generally, the Department would consider that for discrete conditions to have
an overlapping incapacity, those injuries or diseases must at least affect the
same system function and be assessable within the same system-specific chapter
of GARP V.
Consider the example of a person
receiving disability pension in respect of incapacity from emphysema under the
VEA and has received lump sum compensation under the SRCA in respect of
osteoarthritis of the knees. Both these conditions might have similar and
overlapping effects, such as reducing the person’s walking pace; however, the
incapacity from either condition would not be considered to be the same. This
is because the incapacity from the emphysema would affect the person’s
cardiorespiratory system and be assessable under Chapter 1 of GARP V, whereas
the incapacity from the osteoarthritis would affect motor function low limbs
and be assessable under Chapter 3 of GARP V.
Another example would be a person
who suffers from tinnitus and post-traumatic stress disorder (PTSD). Though
both conditions may have similar effects (disturbed sleeping patterns, etc.)
they are not assessable under the same system specific chapters of GARP V.
Tinnitus is assessable under Chapter 7 of GARP M (Ear, Nose and Throat
Impairment), whereas PTSD is assessable under Chapter 4 of GARP V (Emotional
and Behavioural Impairment) and therefore would not be considered to result in
the same incapacity and would not be offset.
Alternatively, consider the
example of a veteran who is receiving disability pension in respect of
incapacity from chondromalacia patella (CMP) under the VEA and has received
lump sum compensation under the SRCA in respect of osteoarthritis of the
knees. The incapacity from both conditions would be considered to be the same
if both the incapacity from the CMP and the incapacity from the osteoarthritis
affected the veteran’s motor function of the low limbs and were assessed under
Chapter 3 of GARP V.
1.5 The
RSL proposed a different amendment to the VEA. Could you comment on this
proposal?
The Department considers that the
proposed amendments in Schedule 2 of the Bill are the most appropriate way to
clarify and affirm the policy intention of the offsetting provisions. It is
arguable that the suggestions for amendment by the RSL go beyond the scope of
the amendments contained within the proposed legislation.
The Department has concerns about
the RSL proposal’s reliance on the use of the apportionment methodology in
Chapter 19 of GARP V and the ‘but for’ test. This process is not a valid
substitute for offsetting.
Chapter 19 of GARP V applies
“whenever an impairment is not due solely to the effects of accepted
conditions” (for example, where impairment is also due to the effect of
non-accepted conditions under the VEA, such as age related conditions).
Where the two different conditions
contribute to the same incapacity, apportionment under Chapter 19 is not always
feasible. Chapter 19 of GARP M requires relative contributions to be
determined based on proper medical advice. It is frequently impossible for
medical practitioners to assess the relative contributions of different
conditions, particularly where the symptoms of the conditions substantially
overlap. Indeed, the more closely incapacity from an accepted condition
resembles incapacity from a non-accepted condition, the less feasible it is to
make an assessment of the relative impairments for the purposes of Chapter 19.
For example, if a person had an
accepted condition of PTSD and a non-accepted condition of generalised anxiety
disorder, and both would cause a similar symptomatology in the absence of the
other, no apportionment could feasibly be made. The 'but for' test proposed in
the RSL's submission on apportionment does not resolve this problem. Current
practice, which will not change under the Bill, is that the issue is not
managed by making an apportionment under Chapter 19.
2. Costs of obtaining
compensation
2.1 In its
submission, the Vietnam Veterans' Federation state that the legal costs and
disbursements should not be taken into account in the offsetting arrangements—they
are not the compensation for injuries but the cost of obtaining that
compensation.
Could you explain how the costs
of, and other expenses incurred in, obtaining compensation which are then
included in the compensation payment, are treated under the legislation?
'Party-party' legal costs are subtracted from a lump
sum compensation payment before any offsetting occurs. 'Party-party' costs
include all amounts specifically included in any Court judgement, settlement or
other compensation payment as 'costs'. 'Party-party' costs are not regarded
as being in the scope of the definition of compensation.
'Solicitor-client' costs are separate from
'party-party' costs and include all other costs that are not specifically
included in a settlement or judgement. These costs are a private arrangement
between the solicitor and the client and are not excluded from the compensation
payment and are therefore offset.
This policy is aligned with the
policy on legal costs in respect of compensation recovery applying to income
support payments.
3. Need for change
3.1 The
RSL states that the proposed amendments are unnecessary because the current
legislation already requires discounting in the assessment of pensions if two
different injuries contribute to the same impairment.
Is
this statement correct? If so, why is there a need to make the proposed
amendments?
The statement is not correct
because the decision of the Full Federal Court in Smith has created some
uncertainty about the policy intention of the offsetting legislation. The
proposed legislation will confirm and affirm this policy intention.
As stated above, use of the
apportionment methodology in Chapter 19 of GARP V is not a valid substitute for
offsetting.
3.2 In its
submission, DVA stated that if passed the amendments 'should avoid the
likelihood that, on the basis of the Smith case, those seeking future
compensation payments could circumvent the offsetting provisions by exclusion
of specific injuries or diseases from the terms of the compensation
settlements'.[1]
Could you inform the committee
about previous examples of, and details on, cases where someone has
circumvented the compensation offsetting provisions?
The Department has not been able
to identify any other offset cases that reflect Mr Smith’s particular
circumstances. The decision of the Full Federal Court is limited in
application to the particular circumstances of Mr Smith’s case and is contrary
to way the offsetting provisions have been and are being administered in other
cases.
The purpose of the proposed
legislation is to prevent a person circumventing the intention of the
legislation again in the future.
Furthermore, the proposed
legislation will remove any doubt or uncertainty created by the Full Federal
Court decision. The Department has received at least one inquiry from a legal
firm seeking to rely on the decision of the Full Federal Court in Smith.
While this inquiry has been
resolved, the proposed legislation will remove confusion about the application
of the Smith decision and ensure that the offsetting provisions continue to be
administered as intended, even where the same or similar particular
circumstances arise again.
4. Consultation and
communication with the ex-service community
4.1 Could
you inform the committee about the level of consultation that took place with
the ex-service community in respect of the changes contained in schedule 2?
The 14 national ex-service
organisations (ESOs) were briefed about the purpose of the proposed legislation
a number of times on Budget day and post-Budget. These 14 ESOs are:
- Australian Federation of Totally & Permanently Incapacitated Ex-Servicemen & Women (TPI Federation)
- Australian Peacekeepers & Peacemakers Veterans’ Association (APPVA)
- Australian Veterans & Defence Services Council (AVADSC)
- Defence Force Welfare Association (DFWA)
- Legacy Co-ordinating Council
- Partners of Veterans Association (PVA)
- Returned & Services League of Australia (RSL)
- Vietnam Veterans Association of Australia (VVAA)
- Vietnam Veterans’ Federation of Australia (VVFA)
- Naval Association of Australia
- Royal Australian Air Force Association (RAAF)
- Royal Australian Regiment Association (RAR)
- Australian Special Air Service Association (ASASA)
- War Widows’ Guild of Australia
The Prime Ministerial Advisory
Council on Ex-Service Matters (PMAC) was also briefed at the time of the Budget
announcement. PMAC is an advisory body appointed by the Minister to represent a
broad experience and understanding of the issues affecting the ex-service and
defence communities.
DVA Deputy Commissioners in each
state and territory also briefed local ESOs about the proposed changes
following the Budget announcement.
No concerns with the proposed
legislation were raised at these briefings. Furthermore, no correspondence has
been received expressing concerns with the proposed legislation.
4.2 The
committee notes the statement in the Explanatory Memorandum that the High Court
[sic] decision highlighted 'the need
for greater clarity in the compensation offsetting provisions'. The committee
also notes the observation of the Review of the Military Compensation
Arrangements which found that:
Dual eligibility continues to be a key
source of complexity, confusion and misunderstanding among administrators,
claimants and their representatives. It was a central reason for the
development and enactment of MRCA as a single piece of compensation legislation
covering all forms of service.[2]
In your view, is the intention of
Schedule 2 to bring clarity to help the courts interpret the meaning of the
legislation or to help veterans and/or their dependants better understand the
offsetting arrangements?
Yes, these amendments are
concerned with affirming the longstanding policy intention of the offsetting
provisions and restoring clarity following the decision of the Full Federal
Court in Smith. However, the amendments are separate to the Review of Military
Compensation Arrangements (the Review).
The Review commented in its
report that one of the reasons for the introduction of the Military
Rehabilitation and Compensation Act 2004 (MRCA) was to create a single
system for injuries, diseases and deaths related to service rendered on or
after 1 July 2004. The MRCA is prospective legislation and does replace the
VEA and the SRCA for service rendered before 1 July 2004.
For example, an incident that was
a major impetus for the development of the MRCA was the Black Hawk Helicopter
accident of 12 June 1996. That accident drew attention to the differences in
the form of compensation arrangements that applied to members of the Australian
Defence Force (ADF) who were injured or killed. Depending on dates of
enlistment and period of service, some of the members killed or injured in the
accident had compensation coverage under both the SRCA and the VEA, whereas
other members had compensation coverage under the SRCA only. This situation
was not addressed retrospectively by the introduction of the MRCA. It was only
addressed prospectively for service rendered after 1 July 2004.
The proposed legislation is
intended to clarify and affirm the principle of offsetting for same incapacity
following the Smith case, which has limited or no application to the
arrangements for service rendered before 1 July 2004 and the offsetting
provisions within the VEA. The Smith decision has no application to the MRCA
in situations were service has been rendered after 1 July 2004.
The proposed legislation is
unrelated to the examination of offsetting issues in the Review. This
legislation addresses the issue of when offsetting is applied under the VEA,
whereas the MRCA Review considered the amount of compensation that should be
offset under the VEA, as well as some other issues related to offsetting under
the MRCA.
Recommendations made as part of
the Review are currently being considered by Government. The Government has
not yet responded to any of the recommendations from the Review.
5. Request member to
institute proceedings
5.1 The
committee notes that there are a number of provisions that enable the Commission
to request a veteran or dependant to institute proceedings against a person who
appears legally liable to pay damages in respect of the same incapacity.
Could you explain the extent to
which the Commission may compel a member or dependant to take such action?
Should these provisions be understood to mean that if an incapacity has arisen
from either a service related cause or a cause from another event (such as a
motor vehicle accident), or both, that the Commission can compel a member to
take action against another party rather than request compensation from DVA?
The Commission can only request a
person to institute action against another party, it cannot compel a person.
Section 30E of the VEA applies
where a pension is payable under Part II of the VEA in respect of an incapacity
from a war-caused condition and a person other than the Commonwealth appears
legally liable to pay damage in respect of that same incapacity. Section 30E
provides that the Commission can only request the veteran or dependant to
institute proceedings against another party.
Subsection 75(1) of the VEA
provides the Commission with similar powers in relation to pensions payable
under Part IV of the VEA.
5.2 What
options are open to the Commission should a member or dependant decline such a
request?
These circumstances are unlikely
to arise in a veteran’s compensation matter. For most compensation claims
lodged under the VEA, the condition claimed will be related to activities
undertaken while a person was on duty as member of the ADF. Therefore, it
would be rare for another party to be liable to pay damages in respect of the
same incapacity.
Examples of where a third party
might be liable to pay damages may include a motor vehicle accident that occurs
while the member is travelling to a place for the purpose of performing duty,
or other similar travel scenarios such as journeying for the purposes of
defence service on a commercial airline or ship.
In these circumstances, under s
30F of the VEA, where a person does not agree to a request under s 30E within a
reasonable time, the Commission may, on behalf of the person, institute
proceedings against the potentially liable person or take over the conduct of
proceedings.
Subsections 75(2) and 75(3) make
similar provision for pensions payable under Part IV of the VEA.
5.3 Could
you provide the committee with some statistics on how often the Commission
under the current legislation has made such a request and how often the request
has been declined?
The Commission has not used these
provisions in the last 10 years and no record has been found of them being used
before then.
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