Preclusion lump sum help

The application form asks the applicant to disclose the details of whether they are precluded from receiving a Centrelink benefit due to receipt of a lump sum.

General principles

Victoria Legal Aid (VLA) must:

• determine whether an applicant is deemed to receive a gross weekly during any preclusion period
• apply the provisions of the means test to determine whether legal assistance is available to the applicant.

Disclosure

Applicants are asked whether they are precluded from receiving a Centrelink benefit owing to the receipt of a lump sum. ‘Lump sum’ in this case includes a payment of compensation, an employment termination payment, or any other payment that precludes the applicant from receiving a pension, allowance or benefit under the Social Security Act.

If the applicant answers ‘Yes’ to this question, they will be asked to disclose how much was received, and what is the preclusion period (in weeks).

If a preclusion period applies, VLA will deem the applicant to have a gross weekly income of $1135 during that period.

When calculating the applicant’s financial position, the total value of the excluded period’s gross weekly income will be deducted from the total amount of the payment, but may include the balance of the lump sum as an asset.

Example

The applicant has received $100,000 lump sum termination pay. Centrelink has precluded the applicant from receiving a benefit for 26 weeks.

Steps

1. VLA will deem that the applicant receives $1135 per week for the 26 week period, and apply the provisions of the means test (relating to income).
2. VLA will then calculate the total gross value of the ‘deemed income’ during the preclusion period (1135 x 26 = $29,510), and deduct it from the total lump sum ($100,000)
3. VLA may then apply the means test (as relating to assets) to the balance of the lump sum left ($100,000 less $29,510): $70,490.

Further information

See the VLA Handbook for lawyers for further information about how lump sum payments are treated in the assets test.

Please note that if your client answers 'yes' to the question seeking details about the lump sum, the application will be manually processed.