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11.6.1 Overview of Taxation

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Last amended: 13 June 2012

Terminology

The table below shows a number of the commonly used terms under previous taxation system and the current names:

Previous Terminology

Now known as

Group Certificate

PAYG Payment Summary – Individual Non Business

(Payment Summary)

Tax Instalment Deductions

Tax Withholdings

Tax Rebate

Tax Offset

Taxable Amount of Pension

Gross Taxable Payment

Group Number

Payer's ABN

Taxable payments

The Income Tax Assessment Act 1997 defines which payments are taxable and which are not. In most circumstances, income support payments are taxable.    

Non-taxable payments

Because of the compensatory nature of disability and war widow's/widower's pensions, these payments, along with their associated allowances, are not taxable. Income support pensions paid on the basis of permanent incapacity for work are not taxable, depending on the recipient or their partner's age.    

Payments to the Commissioner of Taxation

When requested by either the pensioner or the Commissioner of Taxation, DVA can deduct amounts of taxable pension from a pensioner's instalment and make payment to the Commissioner of Taxation.    

More ?

Payments made to the Commissioner of Taxation

Section 11.6.5

More ? (go back)

Calculation of taxation liability

DVA is responsible for calculating the amount of taxable payments it makes to a pensioner in the financial year. It is not responsible for calculating a pensioner's possible tax liability as that is a matter between the client and the Australian Taxation Office. Any inquiries regarding either the requirements of the Australian Taxation Office or tax assessments should be referred to the nearest Australian Taxation Office.

Provision of payment summaries

At the end of each financial year, DVA issues payment summaries to people who have received payments from this department. Taxable and non-taxable payments are separately included on these payment summaries.

The payment summary also identifies those non-taxable DVA payments which are a “tax free pension or benefit” as defined in the A New Tax System (Family Assistance) Act 1999. Tax free pensions and benefits must be separately declared on income tax returns for the purpose of income testing of other government benefits.     

Remote area allowance also appears on the payment summary as it affects a person's eligibility for a Zone Tax Offset (formerly Zone Rebate) under the Income Tax Assessment Act 1936.    

Pension transitional rules and income tax

    

VEA ?

Income tax for transitional rules

Schedule 5, clause 34 VEA

VEA ? (go back)

The legislation provides for pensions calculated under the transitional rules to be treated as pension supplement components for income tax purposes.  Thus, the tax status attached to the particular pension supplement components will apply to the attributed portion of a transitional pension.

Transitional pension components

treated as ... for application of income tax rules

The individual's pension rate

(VIEW pension component (basic rate) + all amounts labelled as supplements)

pension supplement amount

Amount specified in Sch5 34(4) VEA     

VEA ?

Pension supplement basic amount

Schedule 5, sub-clause 34(4) VEA

VEA ? (go back)

(equivalent to VIEW pension component (basic rate) + amount labelled as “Pension supplement Tx”)

basic amount of pension supplement

For service pension:

Transitional maximum payment rate

less the sum of VIEW pension component (basic rate) + “Pension supplement Non Tx”

For ISS:

minimum pension supplement amount

Tax-exempt pension supplement amount, which is the minimum pension supplement amount and the remaining portion of the pension supplement in excess of the basic amount


The Department of Veterans' Affairs.

The Department of Veterans' Affairs.