Offsetting

Offsetting

Offsetting

This page provides examples of how offsetting is applied to veterans of the ADF, and, in some cases, the AFP, who received coverage as a result of a deployment.

The terminology used here is intentionally simplified and not "legally precise" in order to make the content accessible and relatable to the general public, as well as to veterans and their families who may not be familiar with technical legal terms.

Some Abbreviations and Definitions

• DFRDB: The Defence Force Retirement and Death Benefits Scheme (DFRDB) functions similarly to a superannuation scheme, though its structure is notably different. It was available to Australian Defence Force (ADF) members from 1 October 1972 to 30 September 1991. Under the scheme, all members were required to contribute until they completed 40 years of service. Key aspects of the scheme include:
  • Each member contributed 5.5% of their post-tax salary to the fund, with this percentage fixed and not subject to salary sacrifice arrangements.
  • The government contributed 3% of each member’s pay as Employer Productivity Contributions.
  • Both the member and employer contributions were directed into the Consolidated Revenue Fund.
  • After 20 years of service, members became eligible for a lifelong fortnightly pension, often referred to as “retirement pay.”
  • When DFRDB was introduced into Parliament by the Prime Minister, Me McMahon, on 26 Oct 1972 the Prime Minister stated:
  • that members’ contributions in future be paid to consolidated revenue and that the Commonwealth guarantee the benefits provided and meet all costs not covered by members’ contributions.
  • The scheme should provide retired pay for both officers and other rank members at the completion of twenty years service. Retired pay should become payable at the rate of 35 per cent of final pay at the completion of twenty years effective service.
• VEA: The Veterans' Entitlements Act 1986 (VEA) covers service during wartime as well as specific operational deployments, along with certain peacetime service from 7 December 1972 to 30 June 2004. For peacetime service, a member who had not completed a qualifying period of three years in wartime or specific operational deployments prior to 7 April 1994 is not covered by the VEA unless they were medically discharged.
• MRCA: The Military Rehabilitation and Compensation Act 2004 (MRCA) offers rehabilitation and compensation benefits to ADF members who served on or after 1 July 2004.
• DRCA: The Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) provides rehabilitation and compensation for injuries and diseases arising from:
  • Peacetime and peacekeeping service up to and including 30 June 2004, and
  • Operational service during the period from 7 April 1994 to 30 June 2004.

Incapacity Payments.   Incapacity benefits represent the difference between your normal earnings (what you were earning prior to your injury or incapacity) and your actual earnings or ability to earn at the time you are incapacitated for service or work. Incapacity Payments are initially payable at a rate equal to 100% of your normal earnings, less any amount of actual earnings at the time you are incapacitated for service or work and any Commonwealth superannuation payments (pension and/or lump sum) you receive.

Actual Examples of the Application of Offsetting to Veterans and Their Families (Including Widows and Widowers)

To protect the identity and mitigate further impact on veterans and their family members, dollar amounts have been adjusted to fall between $2,000 and $4,000.

This Veteran served for over 40 years with the majority in the SASR

The veteran retired at 62 and was a DFRDB recipient, and commuted (in other words received an advance payment) of five years of DRRDB payments totaling $510,296.97 required to be repaid at 6% a year.

The veteran was not medically discharged by did have some service related illness/injuries and received a Gold Card and disability pension for those illnesses and injuries.

The Veteran starts a business and plans to travel internationally to run that business however a trigger event occurs and the veteran becomes ill with a illnesses including Post Traumatic Stress Disorder and would appear not likely to be able to work again.

Unable to undertake civilian employment within the Commonwealth employment sector because of MRCA accepted incapacity in capacity income is calculated as his final salary in service of $102,544 

Notes: 

• The repayment of commutation is for the remainder of the veterans' life. If the veteran lives to be 82 they will have repaid 20 years x $30,576 per year = $1,148,290 repaid.  This is $611,520 repaid.
• Identify if Commutation has been hit twice
• If this formula was applied in an advantageous way the veteran would review more in the hand: (Military Salary + Remuneration allowance) x Adjustment percentage) – Actual/Deemed earnings – ComSuper pension
• (Military Salary  x Adjustment percentage_ + Remuneration Allowance – Actual/Deemed earnings – ComSuper Pension = Weekly entitlement)
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