A disabled New Zealand woman denied help because of her nationality has won an out-of-court victory in Australia.

The Queensland Government will pay Hannah Campbell, 20, an undisclosed settlement to cover the cost of her disability care and $17,500 for legal costs.

Miss Campbell was diagnosed with cerebral palsy as a baby. She cannot walk, speaks only a few words and requires fulltime care.

Her family moved to Queensland in 2006 and were automatically granted a non-protected special category visa, allowing them to permanently live and work in Australia.

But when the Campbells sought help to care for their daughter, the state government said she was ineligible because she was a "temporary resident".

The ensuing legal battle, accusing the state of discrimination, was hailed as a test case for all New Zealanders' social welfare rights in Australia.

However, the settlement means Queensland's policy of excluding most New Zealanders from disability support remains.

Miss Campbell's mother, Glenda, declined to speak when contacted, because the settlement includes a confidentiality agreement. However, her lawyer, Scott McDougall, said the government had dodged a "multimillion-dollar bullet".

The aim of the legal action was to overturn the rules excluding all New Zealanders, he said, but a lawyer always had to put his client first.

"On a personal level that can be pretty frustrating, but it's part of public-interest litigation."

More than 280,000 New Zealanders living permanently in Australia have the same type of non-protected special category visa as Miss Campbell, which cuts access to many social safety nets, including welfare and disability support.

The limits apply in all Australian states, but are most restrictive in Queensland. They have been blamed for a growing number of young New Zealanders in Australia living on the streets or being in prison.

Kiwi rights advocate David Faulkner, who was heavily involved in the Campbells' legal battle, said he was disappointed the case had not gone further.

"If the policy had been ruled unlawful, it would have enabled thousands of New Zealanders with disability to get support," he said. The settlement showed the government knew its policy was discriminatory but had decided it was more cost-effective to settle complaints as they arose, he said.

The fight could continue, with several other families in Queensland considering similar legal action. The Ismail family in Western Australia fought a similar battle last year after their New Zealand-born son, who has Asperger's syndrome, was denied disability care.

The family were offered a confidential settlement provided they did not speak about the complaint, but refused. They eventually won help for their son.

Earlier this year, the Western Australian Government quietly changed the eligibility rules for disability support to cover all Kiwis living in the state.

- © Fairfax NZ News