NDIS CRAs
When an injured person receives a lump sum compensation payment which includes any compensation for future care, therapy and equipment, then a Compensation Reduction Amount (CRA) will be calculated by the National Disability Insurance Agency (NDIA) to reduce future NDIS funding.
The aim of doing the CRA calculation and then applying it to the NDIS plan is to prevent ‘double-dipping’: a situation where a plaintiff receives a lump sum settlement to pay for future care, therapy, or equipment, and then the NDIS pays for those same supports.
The calculation seeks to estimate how much of the compensation was for the sorts of things that the NDIS would otherwise provide. It is intended to be fair to both the injured person and the taxpayer.
The theory is that compensation recipients are expected, at least broadly, to spend their settlement funds roughly in line with the relevant heads of damages.
NDIS Compensation Rule 3.7 allows for amortisation of the calculated CRA over a period no longer than the remainder of the participant’s life expectancy (as estimated by the Office of Scheme Actuary).
Recent AAT consideration
The recent decision of DLYS and National Disability Insurance Agency [2023] AATA 2965 shone some light on the complex NDIS CRA calculations impacting personal injury compensation clients.
The matter involving a 22-year-old woman who was injured as an infant and received a personal injury settlement. She was an NDIS participant for approximately 12 months before she had a CRA applied to her plan. The CRA significantly reduced her NDIS funding.
The participant believed the correct divisor to be used in the CRA calculation was her remaining 73.4 year life expectancy, rather than the 53.3 year figure used by the NDIA.
This argument was not accepted. The tribunal noted that the formula allows for the amortisation of the total CRA across a period no longer than the remainder of the participants expected life and is to be calculated in accordance with accepted actuarial modelling and practices.
The tribunal did not decide which was the correct life expectancy but instead noted that the Office of the Scheme Actuary has access to additional information when considering life expectancy.
They were not troubled by the notion that a participant may end up having a longer life expectancy (than the divisor), because after having a shorter pay-back period there will be no more CRA applied (so the participant will be OK later in life).
This is cold comfort to those participants now seeing their NDIS plans significantly cut or reduced to nil following the application of a CRA.