Will Centrelink and Medicare refunds take part of my compensation? (2026)
Centrelink and Medicare refunds can come out of an injury payout. If a judgment or settlement is more than $5,000, the Commonwealth can recover Medicare benefits paid for injury-related treatment. Centrelink can also apply a preclusion period when a lump sum includes compensation for lost earnings. Usually, the insurer deals with these amounts before releasing your balance.
Key takeaways
How Centrelink and Medicare refunds work
Centrelink and Medicare refunds come from Commonwealth laws, not Queensland laws. So they can apply to a car accident (CTP) claim, a WorkCover common law claim or a public liability claim. Services Australia handles recovery for both Medicare and Centrelink.
First, the Health and Other Services (Compensation) Act 1995 lets the Commonwealth recover Medicare benefits for treatment of your injury. Second, Part 3.14 of the Social Security Act 1991 can stop or claw back some Centrelink payments after compensation. In addition, the NDIS has its own recovery rules for participants.
Centrelink and Medicare refunds matter because they reduce what you receive. They also change the cap on legal fees, which our guide to personal injury lawyer fees explains. This page covers each refund in turn, then the questions to ask before you settle.
When the Medicare $5,000 rule applies
Section 8 of the Health and Other Services (Compensation) Act deals with judgments and settlements. Once one fixes your compensation, an amount equal to past Medicare benefits becomes payable to the Commonwealth. It covers benefits for professional services you received because of the injury, or to treat it. The Act makes you liable for that amount. However, the payer must deal with it before releasing your money, as explained below.
There is a small-claims exception. Under section 38, the recovery rules do not apply to a judgment or settlement of $5,000 or less. However, that amount must be the entire compensation for the injury. The regulations can set a higher figure, so check the current threshold with Services Australia before you settle.
The amount can also shrink. For example, a settlement may cut your damages because you were partly at fault. Then the Medicare amount drops by the same proportion (s 8(2)). Also, a court judgment may name a smaller amount for past medical expenses. If so, the Medicare charge cannot exceed it (s 8(3)).
|
Step |
What happens |
Section |
|---|---|---|
|
1. Notice to you |
Services Australia may send you a list of Medicare services paid since the injury. |
s 17 |
|
2. Your statement |
You have 28 days to say which listed services related to the injury. Extensions are possible in some cases. |
s 18 |
|
3. Notice of past benefits |
Services Australia can tell the insurer or other payer the total benefits paid. |
s 21 |
|
4. Notice of settlement |
After a judgment or settlement, the payer must notify Services Australia within 28 days. |
s 23 |
|
5. Notice of charge |
Services Australia sets the amount to repay. |
s 24 |
Why Centrelink and Medicare refunds come out before you are paid
Section 32 makes it an offence for the insurer or other payer to release your compensation too early. In general, it must wait until the Medicare amount is dealt with. As a result, Centrelink and Medicare refunds usually come out of the settlement before the balance reaches you.
Instead of waiting for a notice of charge, a payer can sometimes make an advance payment to the Commonwealth. Under section 33B, the advance is 10% of the compensation, unless the Minister sets another percentage. However, the payer must first tell you in writing (s 33A). That notice explains when the Commonwealth can keep the advance and when you may owe more.
The Centrelink lump sum preclusion period
Centrelink works differently. Rather than sending a bill for treatment, it treats part of your lump sum as replacing income. Then certain payments stop for a set number of weeks. This is the lump sum preclusion period (Social Security Act 1991 s 1169).
The starting point is the compensation part of the lump sum. For a settled injury claim, section 17(3) sets it at 50% of the payment. This applies whether or not the other side admitted liability. For other lump sums, such as some court judgments, Centrelink decides which part covers lost earnings or lost capacity to earn.
Next comes the length. Section 1170(4) divides the compensation part by the income cut-out amount in force when you received the compensation. The answer is a number of weeks, rounded down. If you had no periodic compensation payments, the period starts on the day your loss of earnings began (s 1170(3)). Services Australia’s preclusion period page explains how it applies the formula.
Because the period can reach back into the past, it can cover payments you already received. Under section 1178, Centrelink can ask you to repay payments made for days inside the period. Also, under section 1184 it can send a recovery notice to the insurer. The insurer must then pay that amount to the Commonwealth.
Can Centrelink ignore part of a payment?
Yes, in limited cases. Section 1184K lets the Secretary disregard all or part of a compensation payment. However, this needs special circumstances. Even then, the Act says one fact alone is not enough. That fact is that your Centrelink payment and your compensation claim arose from unrelated circumstances. So a lawyer or financial counsellor can help you decide whether a request is worth making.
NDIS repayments alongside Centrelink and Medicare refunds
If you are an NDIS participant, the National Disability Insurance Scheme Act 2013 adds another layer. First, the NDIA can ask you in writing to take reasonable action to claim compensation (s 104). Before doing so, it must consider matters such as your disability, your finances and any barriers to recovery. If you do not act in time on a statutory scheme claim, your plan goes on hold until you take the action (s 105).
Second, you may have to repay past NDIS amounts after a settlement or consent judgment (s 107). These are amounts for supports related to the injury. The amount drops if a settlement cut your damages for your share of fault. The Act also caps it at what remains after Medicare, care charges and Centrelink amounts (s 107(4)). In addition, the NDIA can send notices to the insurer, much as Centrelink can (ss 109–111).
WorkCover payments and common law damages
Workers’ compensation adds a Queensland rule. Suppose you claim damages from your employer. Then section 270 of the Workers’ Compensation and Rehabilitation Act 2003 applies. It requires a deduction from your damages for compensation the insurer paid or must pay. There are some exceptions. In practice, statutory benefits you already received come off a common law award. Our WorkCover claims guide explains both stages.
How Centrelink and Medicare refunds affect legal fees
Refunds also change the fee cap. The Legal Profession Act 2007 s 347 applies to speculative personal injury claims. It caps claim-related legal costs at half of what remains after refunds and disbursements. In that formula, R stands for refunds you must pay, such as Centrelink and Medicare refunds.
For example, take a $100,000 settlement with $10,000 in refunds and $10,000 in disbursements. The cap would be ($100,000 − $20,000) × 0.5, which is $40,000. This example is illustrative only, and your costs agreement may set a lower figure.
Questions about Centrelink and Medicare refunds before you settle
Because Centrelink and Medicare refunds can be large, it helps to know them before you accept an offer. A lawyer can tell you how each rule applies to your claim. Also, you can contact Services Australia directly about your own records.
Frequently asked questions
Sources
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About the author
Marshall Fenech, Editor
Marshall Fenech is the editor of Compare Personal Injury Lawyer QLD. He researches Queensland personal injury law firms and claim rules, checks every fact against public sources such as the Queensland Law Society, MAIC, WorkCover Queensland and Queensland legislation, and dates each check. He does not give legal advice.
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