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Disability Income Rent Test

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Last amended: 15 October 2009

What is the disability income rent test?

    

VEA ?

Service pension and disability income rent test

SCH6-C12 of VEA

ISS recipient and disability income rent test

SCH6-C14A of VEA

VEA ? (go back)

When calculating the amount of rent assistance (RA) payable to a service pension or income support supplement recipient, any disability income received by that person or their partner, is counted as income and may reduce the rate of RA payable to the person. The method of calculating the amount by which RA is reduced due to disability income is known as the disability income rent test. The amount calculated is the RA reduction amount.

Rent assistance free area

    

VEA ?

Rent assistance free area

SCH6-C15 of VEA

VEA ? (go back)

The disability income rent test incorporates a rent assistance free area. The RA free area is the amount of disability income an income support pensioner may receive before their rate of rent assistance is reduced by the disability income rent test. The RA free area applicable to a person is identical to the income free area the person receives as an income support pensioner and is determined by their family situation. If a person's disability income does not exceed the applicable RA free area, there will be no reduction to the rate of RA under the disability income rent test.    

More ?

Reference Library - Pension Rates

PRC/View

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Application of the disability income rent test

If the amount of disability income a person receives exceeds the applicable rent assistance free area, a RA reduction amount is calculated by applying the disability income rent test. The calculation formula is as follows:

RA reduction amount = (disability incomeRA free area) X taper rate

The taper rate in the above formula is identical to the taper rate that applies to the person's income support payment. This means rent assistance is reduced by 50 cents for each dollar of disability income in excess of the RA free area for a person assessed under the standard rules, and reduced by 40 cents per dollar for a person assessed under the transitional rules.

Example of the disability income rent test for a single assessment

A single pensioner is paying $250.00 per fortnight in rent as at 25 September 2009. The fortnightly rate of rent assistance (using the thresholds current as at 25 September 2009) is calculated as follows:

$250.00 (rent) – $99.40 (threshold) x 0.75 = $112.95    

If the same pensioner is in receipt of 100% disability pension, the disability income rent test is applied. This is because the amount of disability income, $363.10 per fortnight (100% DP as at 20 September 2009), exceeds the RA free area for a single pensioner of $142.00 per fortnight. As a result, the rate of rent assistance of $112.95 per fortnight (calculated above) is reduced by 50 cents in the dollar for each dollar of disability income that exceeds $142.00. This equals:

($363.10 (disability income) – $142.00 (RA free area)) x 0.50 = $110.50 (RA reduction amount)

The rate of rent assistance payable is therefore:

$112.95 – $110.50 (RA reduction amount) = $2.45 per fortnight

Example of the disability income rent test for a single transitional assessment

If the above pensioner in receipt of 100% disability pension is a single service pensioner assessed under the transitional rules, the 40 cent taper will apply in the disability income rent test.

That is:

($363.10 (disability income) – $142.00 (RA free area)) x 0.40 = $88.44 (RA reduction amount)

The rate of rent assistance payable is therefore:

$112.95 – $88.44 (RA reduction amount) = $24.51 per fortnight

Example of the disability income rent test for a partnered assessment

A couple is paying a total of $250.00 per fortnight in rent as at 25 September 2009. The fortnightly rate of rent assistance for each member of the couple (using the thresholds current as at 25 September 2009) is calculated as follows:

$250.00 (total rent) – $162.00 (combined threshold) x 0.375 = $33.00 each (rounded)    

If the same couple is in receipt of disability income consisting of the veteran's 100% disability pension, the disability income rent test is applied. This is because the amount of disability income, $363.10 per fortnight (100% DP as at 20 September 2009), exceeds the combined RA free area for a couple of $248.00 per fortnight. As a result, the couple's combined rent assistance is reduced by 50 cents in the dollar for each dollar that exceeds $248.00. For the purposes of the disability income rent test formula, this is a reduction of 25 cents in the dollar for each member of the couple. This equals:

$363.10 (disability income) – $248.00 (RA free area) x 0.25 = $28.78 each (RA reduction amount)

The rate of rent assistance payable to each member of the couple is therefore:

$33.00 – $28.78 (RA reduction amount) = $4.22 each per fortnight

Disability income rent test not applied if hardship pension payable

As disability income is assessable as ordinary income under the financial hardship provisions, it should not be considered to be income again by being considered income for rent assistance purposes. Therefore, if a pension is payable to a person under the financial hardship provisions and rent assistance is also payable to that person, the disability income rent test is not applied.    

Treatment of disability income if compensation or damages payable

If a person receiving a disability pension also receives compensation or damages payments, their rate of disability pension may be reduced. In these cases, it is the reduced rate of disability pension that is used in calculating the person's rate of RA, not the rate prior to reduction.    

Blinded pensioners

The disability income rent test also applies to blinded service pensioners and blinded income support supplement recipients if their income support payment includes a rent assistance component.     


Rent Assistance is an allowance, which may be paid to a service pensioner or income support supplement (ISS) recipient to assist in meeting the cost of rental accommodation.

To receive rent assistance, a pensioner must be paying rent (other than Government rent) for accommodation in Australia, and the amount paid must exceed a certain threshold.

A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.

ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.

 

 

For [glossary:service pension:DEF/Service pension/er/SP] recipients, disability income when calculating the rent assistance reduction amount (as set out in the table in [glossary:SCH6-C13 of the VEA) refers to:

  • disability pension (as defined by section 5Q(1) of the VEA) including disability pension paid by foreign governments; and
  • weekly permanent impairment compensation payments made under section 68, 71 or 75 of the Military Rehabilitation and Compensation Act 2004; and
  • weekly amounts a person would have been paid if the person had not instead received permanent impairment compensation under section 68, 71 or 75 of the Military Rehabilitation and Compensation Act 2004 as a lump sum.

For ISS recipients, disability income when calculating the rent assistance reduction amount (as set out in the table in SCH6-C14B of the VEA) has the same meaning as adjusted disability pension.

 

A person's 'partner' is someone who is a member of a couple with that person.

The disability income rent test is the method of calculating the amount by which a pensioner's rent assistance is reduced because of the disability income paid to them or their patner. The amount calculated is the RA reduction amount.

RA reduction amount = disability incomerent assistance free areaX taper rate

Note: The rent assistance free area and taper rate are identical to those that normally apply to the person's [glossary:income support payment:DEF/Income support payment] and family situation.

 

 

The rent assistance free area is the amount of disability income an income support pensioner may receive without suffering any reduction in rent assistance under the disability income rent test. The rent assistance free area applicable to a person is identical to the income free area the person receives as an income support pensioner and is determined by their family situation.

 

 

The income free area is the amount of income that an income support pensioner may receive without suffering any reduction in pension under the income test.

For [glossary:service pension:DEF/Service pension/er/SP] recipients, disability income when calculating the rent assistance reduction amount (as set out in the table in [glossary:SCH6-C13 of the VEA) refers to:

  • disability pension (as defined by section 5Q(1) of the VEA) including disability pension paid by foreign governments; and
  • weekly permanent impairment compensation payments made under section 68, 71 or 75 of the Military Rehabilitation and Compensation Act 2004; and
  • weekly amounts a person would have been paid if the person had not instead received permanent impairment compensation under section 68, 71 or 75 of the Military Rehabilitation and Compensation Act 2004 as a lump sum.

For ISS recipients, disability income when calculating the rent assistance reduction amount (as set out in the table in SCH6-C14B of the VEA) has the same meaning as adjusted disability pension.

 

The rent assistance free area is the amount of disability income an income support pensioner may receive without suffering any reduction in rent assistance under the disability income rent test. The rent assistance free area applicable to a person is identical to the income free area the person receives as an income support pensioner and is determined by their family situation.

 

 

The taper rate is used to reduce the rate of a person's service pension or income support supplement if they or their partner have any ordinary income in excess of the ordinary/adjusted income free area (IFA). Any income in excess of the IFA will reduce the maximum payment rate by a 'taper rate' of 50 cents in the dollar (or 40 cents for transitional rate of pension). The result is the income reduced rate.

The same taper rate is also used in disability income rent test calculations to determine the amount of rent assistance for service pensioners and income support supplement recipients.

In addition to the income test taper, any assets in excess of the assets value limit will reduce the maximum payment rate per fortnight by 37.5 cents for every $250 over the Asset Value Limit. The result is the assets reduced rate

 

The disability income rent test is the method of calculating the amount by which a pensioner's rent assistance is reduced because of the disability income paid to them or their patner. The amount calculated is the RA reduction amount.

RA reduction amount = disability incomerent assistance free areaX taper rate

Note: The rent assistance free area and taper rate are identical to those that normally apply to the person's [glossary:income support payment:DEF/Income support payment] and family situation.