Civil Justice
31 October 2013
7 – Social security, income tax and compensation payments
Social security payments and the NDIS
Schedule 2 of the National Disability Insurance Scheme Legislation Amendment Act 2013 (Cth)
(‘the Amendment Act’) makes amendments to the Social Security Act 1991 (Cth) (‘the SS Act’) to
ensure that amounts paid under the NDIS for supports funded under a participant’s plan do not
affect social security entitlements.
These amendments have been made to guarantee that NDIS amounts (and returns on these
amounts) are not counted as income, liquid assets or financial assets, and are exempt from the
assets test under the SS Act.
To ensure that NDIS participants do not receive double funding for mobility assistance, the
Amendment Act inserts a new s. 1038 into the SS Act, which provides that a mobility allowance is
not payable to a person when they are a participant of the NDIS and their plan contains a statement
specifying the reasonable and necessary supports that will be funded under the NDIS. In these
circumstances, an NDIS participant will still be eligible for an automatic issue of a health care card
under s. 1061ZK of the SS Act, despite not being in receipt of the mobility allowance.
The Amendment Act makes corresponding amendments to the Veterans’ Entitlements Act 1986
(Cth).
Income tax and NDIS amounts
Schedule 3 of the Amendment Act amends the Income Tax Assessment Act 1997 (Cth) to provide
that payments and benefits provided under the NDIS are exempt from income tax.
Compensation payments and the NDIS
Chapter 5 of the National Disability Insurance Scheme Act 2013 (Cth) (‘the Act’) sets out how
compensation payments, including those from workers’ compensation or motor vehicle accident
insurance schemes, will be dealt with under the NDIS.
A person may become a participant in the NDIS even if they have not made a claim for
compensation. However, the CEO may require a person to take reasonable action to claim or
obtain compensation, or direct the Agency† to recover the costs of supports that have been funded
by the NDIS, prior to settlement or judgment of a compensation claim. The CEO may also seek
recovery directly from compensation payers and insurers.
The provision of support and assistance under the NDIS is not intended to replace existing
entitlements to compensation, including those under common law. In addition, the Act provides for
the NDIS rules to consider lump sum and periodic compensation payments in determining the
funding or provision of reasonable and necessary supports for a participant (s. 35(4)).

Any references to ‘the CEO’ in this fact sheet are to the Chief Executive Officer of the NDIA, or any officer exercising
powers or functions of the CEO under a delegation pursuant to s. 202 of the Act.
†
Any references to ‘the Agency’ in this fact sheet are to the National Disability Insurance Agency (NDIA).
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Civil Justice
7 – Social security, income tax and compensation payments
CEO requires person to take reasonable action
Section 104 applies where, in the CEO‘s opinion, a participant or prospective participant may be
entitled to compensation in respect of personal injury but the person has not taken reasonable
action to claim or obtain that compensation. In such cases, the CEO may, by written notice,
require the person to take reasonable action to claim or obtain compensation within a period
specified in the notice (at least 28 days).
In deciding whether it is reasonable to require the person to take an action, the CEO must have
regard to:
 the disability of the person
 the circumstances that give rise to the entitlement or possible entitlement to compensation
 any impediments the person may face in recovering compensation
 any reasons why the person has not claimed or obtained the compensation
 the financial circumstances of the person and
 the impact of the requirement to take action on the person and their family (s. 104(3).
Further, the CEO must not give a notice unless satisfied that there are ‘reasonable prospects of
success’ in claiming or obtaining the compensation (s. 104(4)).
‘Compensation’ is defined in s. 11 of the Act and includes payments made under a compensation
or insurance scheme, and payments made in settlement of a damages claim, where the payment is
wholly or partly in respect of the costs of supports of the type that could be provided under the
NDIS.
Failure to comply
The consequences of a person’s failure to take action differ, depending on whether the notice
requires them to make a claim for compensation under a Commonwealth, state or territory
compensation scheme, or whether it requires them to make any other type of compensation claim
(including a claim under common law).
If the notice relates to a compensation scheme:
 a failure to comply will result in suspension of a participant’s plan until the required action is
taken (s. 105(2)(a))
 if a participant’s plan is not yet in effect, the CEO must still facilitate the preparation of the
plan, but it won’t come into effect until the required action is taken (s. 105(2)(b))
 if a prospective participant does not take the required action, the CEO may still decide
whether the person meets the access criteria and commence facilitation of the preparation of
the participant’s plan, but it won’t come into effect until the required action is taken (s. 105(3))
If the notice relates to an action to obtain compensation otherwise than under a scheme, the
CEO may:
 take action to claim or obtain compensation in the name of the participant or prospective
participant or
 take over the conduct of any existing claim (s. 105(4)).
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Civil Justice
7 – Social security, income tax and compensation payments
Subsection 105(5) sets out the matters the CEO needs to consider before taking any action to claim
or obtain compensation, or take over the conduct of an existing claim.
Before the CEO can take any action, the participant or prospective participant must be notified in
writing and 28 days needs to have passed since the notice was given (s. 105(6)).
Costs
If the CEO takes action to claim or obtain compensation, or takes over the conduct of an existing
claim, s. 105A provides that the Agency becomes responsible for all costs of and incidental to the
claim that would have been payable by the person, other than costs unreasonably incurred by the
person.
Any amount obtained as a result of a claim must be paid to the participant or prospective
participant, after the Agency has deducted NDIS amounts paid to the person and any costs
incurred by the Agency.
Recovery of NDIS amounts from compensation payments
Part 2, Chapter 5 provides for the calculation of a recoverable amount, to enable recovery of the
costs of supports already funded by the NDIS where compensation is subsequently paid, by
settlement or judgment, relating to a person’s impairment.
Section 108 provides that an amount payable under this part is a ‘debt due’ by the person to the
Agency. This amount may be recovered directly from the compensation payer or insurer (Part 3,
Chapter 5) or from the participant (Part 1, Chapter 7).
Section 116 gives the CEO a discretion, in special circumstances, not to issue a notice to recover a
sum of money from an amount of compensation payable or paid to a person.
For more about recovery of debts see fact sheet 8 – Debt recovery.
Further information
View:
 National Disability Insurance Scheme website (http://www.disabilitycareaustralia.gov.au/)
 National Disability Insurance Scheme Act 2013
(http://www.comlaw.gov.au/Details/C2013C00388)
Disclaimer. The material in this publication is intended as a general guide only. The information contained should not be
relied upon as legal advice, and should be checked carefully before being relied upon in any context. Victoria Legal Aid
expressly disclaims any liability howsoever caused to any person in respect of any legal advice given or any action taken
in reliance on the contents of the publication.
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