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Tax Free Payments and Benefits

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Last amended: 13 June 2012

Income testing of other benefits

In addition to taxable income, an individual may be required to declare certain non-taxable payments on their income tax return for the purpose of income testing for other government benefits (eg. family payments, child care benefits, tax offsets).

Payments which may be taken into account for income testing other government benefits are defined in the A New Tax System (Family Assistance) Act 1999 as a “tax free pension or benefit”.

Income Support payments

The following DVA income support payments are classified as a “tax free pension or benefit”, where the payment is non-taxable:

  • invalidity service pension,
  • partner service pension,
  • income support supplement,
  • Defence Force Income Support Allowance (DFISA),
  • wife pension paid under the Social Security Act 1991.
Compensation payments

The following compensation payments made under the Veterans' Entitlements Act 1986 are classified as a “tax free pension or benefit”:

  • disability pension paid to a veteran or member of the forces,
  • war widow/er's pension.

The following compensation payments made under the Military Rehabilitation and Compensation Act 2004 (MRCA) are classified as a “tax free pension or benefit”:

  • special rate disability pension,
  • permanent impairment payments,
  • wholly dependent partner's pension.

The following compensation payments made under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA) are classified as a “tax free pension or benefit”:

  • permanent impairment payments,
  • dependant lump-sum compensation following death,
  • 'prescribed children' weekly payments following death of a veteran

The following compensation payments made under the Defence Act 1903 are classified as a “tax free pension or benefit”:

  • severe injury adjustment (SIA) lump sum payments,
  • additional death benefit (ADB) for dependants