How DVA Incapacity Payments Are Calculated

If an accepted service-related injury or disease prevents you from working, DVA can pay incapacity payments under the MRCA (or DRCA for older claims). Unlike the permanent impairment lump sum, incapacity payments are weekly and ongoing, they continue as long as you remain unable to work at your pre-injury capacity. They are earnings-replacement, meaning they are designed to top up what you actually earn to approximate what you would have earned if not for your service injury.

The Basic Formula

The starting point is your Normal Weekly Earnings (NWE), broadly, what you were earning (or would have been earning) immediately before your incapacity began. For most veterans this is their ADF salary at the time of discharge or medical separation. DVA then subtracts your current civilian earnings and any applicable superannuation offsets to arrive at your incapacity payment.

• Normal Weekly Earnings (NWE), your discharge ADF salary converted to a weekly figure
• Minus: Current Civilian Earnings, what you actually earn in civilian work
• Minus: CSC Invalidity Pension offset (employer-funded portion)
• Minus: VEA Disability Compensation Payment (DCP) offset if applicable
• Equals: Weekly Incapacity Payment

The 45-Week Rule

For the first 45 weeks of incapacity, DVA pays the full difference between your NWE and civilian earnings, up to 100% of NWE. After 45 weeks, the calculation changes based on how many hours per week you are able to work. Veterans who cannot work at all continue at 100% of NWE. Those who work some hours receive a reduced rate based on a stepped table.

The post-45-week reduction is designed to encourage gradual return to work. If your medical circumstances mean you are permanently unable to work more than 10 hours per week, you may be eligible to elect SRDP instead of continuing to receive incapacity, which is often a better long-term outcome.

CSC Superannuation Offsets

If you receive an invalidity pension from Commonwealth Superannuation Corporation (CSC), the Commonwealth-funded portion of that pension offsets your incapacity payment dollar-for-dollar. Different schemes have different offset rules.

MSBS (Military Superannuation and Benefits Scheme)

Under MSBS, the employer benefit (the portion funded by the Commonwealth) is fully offset against incapacity. The member benefit (funded by your own contributions) is not offset. For most MSBS members, approximately 60–70% of the invalidity pension is the employer component. DVA uses a letter from CSC confirming the split.

DFRDB (Defence Force Retirement and Death Benefits)

Under DFRDB, approximately 85% of the invalidity pension is considered Commonwealth-funded and offset against incapacity. This is a higher offset rate than MSBS, which means DFRDB recipients typically receive less in incapacity payments for the same gross CSC pension.

ADF Cover (from 1 July 2016)

Members who joined from 1 July 2016 are covered by ADF Cover for invalidity, with super accumulation in the ADF Super (or other civilian fund) scheme. ADF Cover invalidity benefits are 100% Commonwealth-funded and fully offset. Given they are often modest (especially for short-service members), the impact may be less significant than for DFRDB/MSBS.

VEA Disability Compensation Payment (DCP) Offset

If you also receive a Disability Compensation Payment (DCP) under the VEA, this is offset dollar-for-dollar against your MRCA incapacity payment. This is because both payments are compensating for the same disability-related incapacity. Note: this direction is important, DCP offsets incapacity, not the other way around. If you receive both, your incapacity payment is reduced, not your DCP.

When Do Incapacity Payments Stop?

Incapacity payments cease when you reach pension age (currently 67), when DVA determines you have the capacity to earn at or above your NWE, or when you elect to receive SRDP instead. They also stop if your accepted condition is found to have substantially resolved. DVA conducts periodic reviews of your capacity, and you may be required to participate in rehabilitation assessments.

Frequently asked questions

How long do DVA incapacity payments last?

DVA incapacity payments continue until you reach pension age (67), until DVA determines you can earn at or above your Normal Weekly Earnings, or until you elect SRDP. They are not time-limited in the way that some civilian income protection insurance policies are, there is no set maximum period. However, DVA conducts periodic capacity reviews and may require participation in vocational rehabilitation.

Do incapacity payments affect Centrelink?

Yes. DVA incapacity payments are assessed as ordinary income for Centrelink purposes. If you receive both DVA incapacity and a Centrelink payment such as Disability Support Pension, your Centrelink payment will likely be reduced or cancelled. Many veterans in this situation find that SRDP is preferable because SRDP is exempt from the Centrelink income test entirely.

What happens to incapacity payments if I do some part-time work?

After the first 45 weeks, incapacity payments reduce based on how many hours per week you work. The reduction is stepped, working up to 7.5 hours per week reduces your payment to 75% of the NWE gap; working 15–22.5 hours reduces it to 90%. Working more than 30 hours generally results in a significant reduction and DVA may reassess your capacity. You must notify DVA of any change in work hours.

How is my discharge salary calculated if I was part-time or transitioning?

DVA uses your Normal Weekly Earnings (NWE) which is based on your salary immediately before the incapacity began. For veterans who reduced to part-time service before discharge, DVA may use the full-time equivalent salary if the reduction was due to the service injury. If you were in transition, DVA should use the higher of your ADF salary or what you would have earned in your civilian role. Complex NWE assessments benefit from advocate assistance.