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9.1.5 Order of Reduction

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Last amended: 5 March 2013

Order of reduction for service pension

    

 

To ensure that the non-taxable allowances associated with service pension are reduced last, when the rate of pension is to be reduced under the income or assets tests or the maintenance income test

reductions to service pension occur in the following order:

The minimum amount payable is the minimum pension supplement and the clean energy supplement.

Order of reduction for ISS

    

 

Pension rate reductions for an ISS recipient under the adjusted income test or the assets test occur in the following order:

For ISS purposes, any saved child related payment is paid in addition to the provisional rate of ISS resulting from the adjusted income test or the assets test. These payments are therefore not included in the order of reduction.

 

ISS cannot be reduced for blinded pensioners.  However, rent assistance is subject to rate reductions.

Reduction under compensation recovery provisions - service pension, no saved children

When a service pensioner without saved children:

  • receives additional amounts for rent assistance and
  • the pension is to be reduced because of the receipt of periodic compensation payments,

the reduction occurs in the following order:

Reduction under compensation recovery provisions - ISS, no saved children

When an ISS recipient without saved children:

  • receives additional amounts for rent assistance, and
  • the ISS is to be reduced because of the receipt of periodic compensation payments,

the reduction occurs in the following order:

Reduction under compensation recovery provisions - service pension, saved children

When a service pensioner with saved children has the compensation affected component of the pension reduced because of the receipt of periodic compensation payments:

the reduction occurs in the following order:

Allowances excluded from order of reduction for service pension and ISS

Remote area allowance is not included in the order of reduction, as its payability depends on the payability of service pension or ISS. If service pension or ISS is reduced to nil, then remote area allowance is automatically cancelled..    

 

 


 

 

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.

According to section 5H of the VEA income is:

  • an amount earned, derived or received by a person for the person's own use or benefit;
  • a periodical payment by way of gift or allowance; or
  • a periodical benefit by way of gift or allowance.

 

 

One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL).

The maintenance income test applies when assessing a person's entitlement to Family Tax Benefit. A threshold amount of income (the maintenance income free area) is allowed, with each dollar of maintenance income above the threshold reducing FTB Part A payments by 50 cents. The maintenance income test also applies to child-related payments in respect of DVA saved children.

 

 

The energy supplement is an ongoing, regular payment designed to help recipients meet the cost of living impact of the carbon price.

 

 

The pension supplement basic amount is an annual rate paid fortnightly from 20 September 2009. It replaces the GST supplement. It is indexed twice a year in line with CPI increases.

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

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.

From 1 January 1998 responsibility for administration of most income support child related payments was transferred to  Centrelink. However, saving provisions allow any person in receipt of service pension or income support supplement on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.

 

 

The energy supplement is an ongoing, regular payment designed to help recipients meet the cost of living impact of the carbon price.

 

 

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

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.

 

 

The ordinary income test provides for an ordinary/adjusted income free area; that is, it provides that the pensioner may receive income up to a certain amount without any reduction in their maximum rate of pension (provided that the assets do not exceed the assets value limit). Any income in excess of the income free area will reduce the pension at the rate of 40 cents in the dollar.

 

 

One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL).

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

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.

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

From 1 January 1998 responsibility for administration of most income support child related payments was transferred to  Centrelink. However, saving provisions allow any person in receipt of service pension or income support supplement on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.

 

 

The provisional rate of ISS is the rate of ISS for a non-blinded Australian war widow before any remote area allowance payable is added.

 

 

The ordinary income test provides for an ordinary/adjusted income free area; that is, it provides that the pensioner may receive income up to a certain amount without any reduction in their maximum rate of pension (provided that the assets do not exceed the assets value limit). Any income in excess of the income free area will reduce the pension at the rate of 40 cents in the dollar.

 

 

The pension supplement is added to a person's maximum basic rate. The pension supplement is calculated as a 'combined couple' rate. The 'not a member of a couple' rate is 66.33% of the 'combined couple' rate. The member of a couple rate is 50% of the combined couple rate. From 1 July 2010, the minimum pension supplement amount will be able to be claimed on a quarterly basis rather than on a fortnightly basis.

 

 

The pension supplement basic amount is an annual rate paid fortnightly from 20 September 2009. It replaces the GST supplement. It is indexed twice a year in line with CPI increases.

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.

The energy supplement is an ongoing, regular payment designed to help recipients meet the cost of living impact of the carbon price.

 

 

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

From 1 January 1998 responsibility for administration of most income support child related payments was transferred to  Centrelink. However, saving provisions allow any person in receipt of service pension or income support supplement on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.

 

 

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

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.

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

From 1 January 1998 responsibility for administration of most income support child related payments was transferred to  Centrelink. However, saving provisions allow any person in receipt of service pension or income support supplement on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.

 

 

The energy supplement is an ongoing, regular payment designed to help recipients meet the cost of living impact of the carbon price.

 

 

The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement will become more flexible, with recipients able to elect to receive the payment quarterly. It is calculated as a combined couple rate and is indexed twice a year in line with CPI increases. The 'not a member of a couple' rate is 66.33% of the combined couple rate. The member of a couple rate is 50% of the combined couple rate. The minimum pension supplement commenced on 20 September 2009 and replaced utilities allowance and telephone allowance.

 

 

Remote area allowance is a supplementary payment added to the rate of income support pension where the pensioner's usual place of residence is situated in a remote area, and where the pensioner is physically present in the remote area.