Financial Advice for Permanent Impairment Payments under the MRCA: What Veterans Need to Know

*No Personal Cost for Financial Advice for Veterans: Important Considerations for Lump Sum or Weekly Payments

At KSC Claims (KSC), we understand that managing financial decisions related to your compensation can be a daunting task. That’s why it’s important to fully consider all your options before choosing between a lump sum or weekly payment under the Military Rehabilitation and Compensation Act (MRCA). Whether you are at a point where you’re assessing your Permanent Impairment (PI) compensation or simply exploring your options, professional financial and legal advice can be invaluable in helping you make an informed decision.

What You Need to Know About Financial and Legal Advice

If you are considering converting a periodic payment to a lump sum, you are entitled to seek financial and legal advice at no personal cost up to a maximum amount of $3,202.28. It’s a benefit provided by the Department of Veterans’ Affairs (DVA) to ensure that you understand the full scope of your options, including any potential impacts on your taxes, income support eligibility, or lifestyle changes.

Before deciding, it is highly recommended to speak with a financial adviser or a lawyer. These professionals can help you navigate the choices available and understand how your decision may affect your financial future.

Do You Have to Seek Financial or Legal Advice?

It is not mandatory, but strongly recommended to seek advice. A lump sum payment might feel like an immediate relief, but it comes with important considerations that could impact your financial well-being in the long term. Financial advice can be especially beneficial if you’re not familiar with managing large sums of money or if a significant lifestyle change is involved.

Key Considerations for Your Payment Choice

Several factors may influence your decision on whether to take a lump sum or continue with weekly payments. Here are some of the primary considerations:

• Taxation: PI payments, whether in lump sum or periodic form, are tax-free. It’s still important to understand how this could impact your other financial commitments or future tax obligations.
• Income Support: If you are receiving other benefits such as Centrelink pensions or the VEA service pension, receiving a lump sum might affect your eligibility. A financial advisor can help clarify this.
• Dependants: If you have dependants, additional assistance or taxation benefits may be available to you through DVA or Centrelink, which could influence your decision.
• Lifestyle Changes: Consider how a lump sum might affect your lifestyle, especially if the impairment has already altered your circumstances. Planning for the future is crucial, and an advisor can assist in developing a strategy that aligns with your needs.

How Does the Advice Reimbursement Work?

DVA offers reimbursement for the cost of obtaining financial and legal advice if you are awarded PI compensation at or above 50 impairment points. This payment will cover the costs of advice on which payment option—lump sum or ongoing periodic payment—best suits your circumstances.

However, the reimbursement is strictly for advice related to your compensation options. It does not cover other financial topics like investment management or legal matters unrelated to your compensation, such as family court disputes.

You can seek a second opinion if you’re not satisfied with the first, but please note that the reimbursement is capped. Check the Compensation Payment Rates for MRCA for the current limits.

How to Find a Qualified Advisor

KSC Claims does not recommend specific financial advisers or lawyers, leaving the choice to you. However, to ensure the advice you receive is reliable and professional, the financial adviser must be suitably qualified and hold an Australian Financial Services (AFS) license. You can find a list of licensed advisers through the Australian Securities and Investment Commission’s (ASIC) MoneySmart website or by contacting them at 1300 300 630.

Likewise, a lawyer must hold a current practising certificate, and you can find qualified legal professionals through the Australian Lawyers Directory.

Impact on Other Payments

Choosing a lump sum payment will not affect most MRCA payments, except for the bereavement payment. If you pass away after having received a lump sum, your partner or an eligible young person will not receive a bereavement payment, which is calculated based on the weekly rate of periodic PI payments you were receiving or entitled to receive.

What About Taxation?

Both lump sum and periodic PI payments are tax-free, so you don’t have to worry about paying taxes on the compensation. However, if you have any concerns about how this might interact with other income, we recommend contacting the Australian Taxation Office for further clarification.

How KSC Can Help You

At KSC Claims, we guide veterans through the complexities of the DVA claims process, ensuring you make informed decisions about your compensation options. If you’re unsure whether to take a lump sum or continue with periodic payments, our team is here to help you access the financial and legal support you need to make the right choice for your future.

Need Assistance? If you’re considering a lump sum or have any questions about your PI compensation, don’t hesitate to reach out to us.

We’ll make sure you have all the information and resources necessary to secure the best possible outcome.