What is Permanent Impairment compensation?

Permanent Impairment compensation recognises the lasting effect that your accepted service-related injuries or diseases have on your body and your lifestyle. It is a “non-economic loss” payment – it is not a replacement for lost income, so it is paid regardless of whether you are working – and it is tax-free.

DVA works out your offer using two measures: your level of impairment, expressed in points, and a lifestyle rating that reflects how your conditions affect everyday life. Generally you need an impairment of at least 10 points to receive compensation (or five points for some conditions, such as hearing loss, loss of fingers or toes, and loss of taste or smell).

From 1 July 2026, new compensation claims are assessed under an updated Military Rehabilitation and Compensation Act (MRCA). If your claim was lodged earlier, it may still be decided under the rules that applied at the time – we can help you work out which rules apply to you.

Your options: weekly, lump sum or both

When DVA accepts your claim you will receive a notice setting out your weekly PI amount. You then have three options:

• Weekly payments – a tax-free amount paid for life and indexed each year on 1 July. This is what you receive if you don’t make a choice.
• A lump sum – the weekly amount converted into a single tax-free payment.
• A combination – part converted to a lump sum, with the rest continuing as weekly payments.

The lump sum is calculated using conversion factors set by the Australian Government Actuary. The amount stays the same up to age 30 for men and 35 for women, then reduces with age – so the older you are when you choose, the smaller the lump sum compared with the weekly payments you would otherwise receive.

The deadline – and why the choice matters

If you want a lump sum, you must tell DVA within six months of receiving your notice. If you don’t make a choice, weekly payments simply continue.

Once you make a choice, you can’t change it. If you convert only part of your PI to a lump sum, the remaining weekly amount can’t be converted later. That is why this is one of the most important financial decisions many veterans will make.

Things to weigh up

• Your age and health – weekly payments are paid for life, so the value of each option depends on how long you expect to receive them.
• What a lump sum would do for you – paying off your home or other debts, buying a home, or investing can change your financial position significantly. A lump sum without a plan can disappear quickly.
• Your income needs – a reliable, indexed, tax-free weekly payment can underpin your household budget.
• Your other payments – PI can interact with other DVA payments, military superannuation and Centrelink entitlements. These interactions need to be checked before you decide.
• Your family – if you have 80 or more impairment points, an additional lump sum may be payable for each eligible dependent child.
• Future claims – if a condition worsens or a new condition is accepted, your PI can be reassessed, and any new amount comes with its own choice.

DVA can pay for your advice

If your impairment is assessed at 50 points or more, DVA can pay for financial and legal advice to help you make your choice, up to a set limit that is indexed each year. The financial advice must come from a qualified adviser working under an Australian Financial Services Licence. With your permission, DVA can pay the adviser directly – so there is no out-of-pocket cost to you.

Common mistakes to avoid

• Letting the six-month deadline pass without a decision – or rushing a decision to get the money sooner.
• Comparing the lump sum with the weekly amount by simple multiplication, without considering indexation, tax-free status and life expectancy.
• Taking a lump sum without a clear plan for how it will be used.
• Overlooking how the choice affects other payments and entitlements.