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Non-taxable Compensation Payments
Last amended: 3 March 2006
Compensation type payments
The following payments that are made by DVA are considered to be compensation, and are not taxable:
Additional allowances that are non-taxable
Payments of the following allowances, where eligibility arises from a veterans' compensation payment, are non-taxable:
- bereavement payment in respect of disability pension,
- veterans supplement (including veterans supplement paid to war widows),
- attendant allowance,
- [glossary:temporary:] incapacity [glossary:allowance,:]
- [glossary:recreation transport allowance,:]
- loss of earnings allowance,
- [glossary:clothing allowance,:]
- [glossary:Victoria Cross allowance:], and
- decoration allowance.
Veterans' Children Education Scheme (VCES)
Education allowance paid in respect of a child who has not attained 16 years of age is not taxable.
Disability pension, for the purposes of service pension and income support supplement, means:
- a pension paid for incapacity from war caused conditions, or peacetime, peacekeeping or hazardous service caused conditions (other than a war widow's or orphan's pension); or
- temporary incapacity allowance; or
- any other payment in respect of incapacity or death resulting from war or war-like operations in which the Crown has been engaged [usually paid by another Commonwealth country].
A form of pension that is paid to the partner of a veteran where the veteran has died as a result of war service or eligible Defence Service. War widow's/widower's pension is also paid to the partner of a veteran whose death was not war caused if the veteran was a ex-prisoner of war or if the veteran was receiving Extreme Disablement Adjustment Rate, Special Rate (T&PI) or a rate increased in respect of certain war-caused injury or disease.
The widow or widower of the deceased veteran who was immediately before their death:
- a member of a couple, and
- was receiving a disability pension,
is entitled, in respect of the period of 12 weeks after the deceased veteran's death, to payment at:
- the rate at which the disability pension would have been payable to the deceased veteran, if the veteran had not died, on the first available pension pay day after the Commission becomes aware of the death, or
- the general rate in force on the pension pay day,
whichever is lower. Refer to subsection 98A of the VEA for the full definition.
The veterans supplement was introduced on 20 September 2009 as part of the Government's Secure and Sustainable Pension Reform package. It is a fortnightly payment that replaces pharmaceutical allowance and/or telephone allowance for compensation recipients who are not in receipt of an income support supplement. There are two rates, the veterans supplement low rate and the veterans supplement high rate. The low rate replaces one of the allowances and the high rate replaces both. The low rate is indexed every January to the Consumer Price Index (CPI). The high rate is always twice the amount of the low rate.
The purpose of attendant allowance is to assist an eligible Veterans, Members of the Forces, or a Member of a Peacekeeping Force with the cost of an attendant to help with such things as feeding, bathing, dressing and other activities of daily living. The allowance is paid to the veteran and not the attendant.
To be eligible for attendant allowance the person must be in receipt of a Disability Pension for Incapacity for a war-caused or defence-caused injury or Disease that severely affects a persons' ability to care for themselves. Attendant allowance is payable at a higher or a lower rate depending on the type of Injury or disease accepted under the Veterans' Entitlements Act.
According to subsection 5D(2), incapacity from a war or defence-caused disease or injury is a reference to the effects of that injury or disease, and not a reference to the injury or disease itself.
- receiving treatment for a war or defence-caused disability (including waiting for the supply or repair of an artificial limb or other surgical aid),
- using part or all of employer provided sick leave for a war or defence-caused disability, and now having no benefit to cover an absence for another illness, or
- attending an appointment arranged by DVA for the investigation of a claim for disability pension.