C38/2004 Defence Force Income Support Allowance

Purpose

T — his instruction provides policy information relevant to the Defence Force Income Support Allowance (DFISA) initiative. Systems information will be provided in a separate instruction.

What is DFISA?

DFISA is a new income support payment made by DVA under the Veterans' Entitlements Act 1986 (VEA).

DFISA may be payable to a person whose social security income support payment is reduced or not payable because of adjusted disability pension (adjusted DP).

Commencement date

DFISA became payable on 20 September 2004. The first instalment of DFISA was released on DVA payday 30 September 2004.

Legislative amendments

The DFISA provisions are contained within the Veterans' Entitlements (Clarke Review) Act 2004 (the Clarke Act), which received Royal Assent on 30 June 2004.

The link to the Veterans' Entitlements (Clarke Review) Act 2004 is available through the Scaleplus web site located at http://scaleplus.law.gov.au/html/comact/12/6857/t…

The Clarke Act inserted a new Part VIIAB into the Veterans' Entitlements Act 1986 (VEA). While this part contains the core DFISA provisions, the Clarke Act also made a number of consequential amendments to other parts of the VEA.

Consequential amendments

The Clarke Act also amended the following Acts:

• the A New Tax System (Family Assistance) Act 1999;
• the Income Tax Assessment Act 1936;
• the Income Tax Assessment At 1997; and
• the Social Security Act 1991 (SSA).

Adjusted DP

Adjusted disability pension (adjusted DP) is a new term introduced to the VEA by the Clarke Act.

Adjusted DP means:

• General Rate (payable in multiples of 10% up to 100%), Extreme Disablement Adjustment, Intermediate Rate and Special Rate disability pensions paid under Part II or IV of the VEA;
• Increased rates of disability pension for amputation and blindness, paid under section 27 of the VEA;
• temporary incapacity allowance, paid under section 107 of the VEA;
• dependant's pension, which is a small frozen amount paid to dependants of disability pensioners.  There have been no new grants since 1986; and
• permanent impairment payments and Special Rate Disability Pension paid under the Military Rehabilitation and Compensation Act 2004 (MRCA).

Adjusted DP does not include war widow(er)'s pension, orphan's pension or payments made by other governments to compensate for war or service related injuries.

Affected population

DFISA may be paid to social security income support recipients whose rate of social security payment is impacted by the inclusion of adjusted DP in their assessment.  Those payable will include recipients of a social security payment, at nil rate or above, whether paid by Centrelink or from DVA.

Contact officer

Brenda Franklin, Income Support Policy: (02) 6289 6426

Background

The Review of Veterans' Entitlements (known as the Clarke Review) recommended that disability pension be exempt from the assessment of income support payments made under the Veterans' Entitlements Act 1986 (VEA) and social security law.

In response to this recommendation the government introduced the Defence Force Income Support Allowance (DFISA) in respect of social security payments, and made changes to the assessment of income support supplement (lISS).

DFISA

Social security payments

DFISA is a payment made by DVA to veterans and their partners whose social security payment is reduced (including to nil) because of the inclusion of adjusted DP in the assessment of those payments.

ISS changes

Income Support Supplement

Adjusted DP has been excluded from the assessment of ISS.  The disability income rent test has been applied to ISS renters.

DFISA is not paid to war widow(er)s in receipt of ISS.

Information on the changes to ISS is contained in Departmental Instruction C39/2004.

When is DFISA payable?

DFISA is payable to a person who is qualified for a social security income support payment where they or their partner receive adjusted DP and they meet one of the following criteria:

• their social security income support payment is reduced because of the impact of adjusted DP, or

• their social security income support payment is not payable because of the impact of adjusted DP.

When is DFISA not payable?

DFISA is not payable to a person if:

• their social security income support payment is paid under the financial hardship provisions;
• the rate of DFISA would be nil; or
• they have elected not to receive DFISA (see section 5 'Electing not to receive').

Affected income support payments

Centrelink generally pays the following social security income support payments.  These payments may be reduced by adjusted DP and may attract DFISA.

These payments are:

• Age pension (also paid by DVA)
• Wife pension (also paid by DVA)
• Disability support pension
• Carer payment
• Newstart allowance
• Parenting payment
• Sickness allowance
• Bereavement allowance
• Widow B pension
• Youth allowance
• Austudy payment
• Widow allowance

• Mature age allowance
• Special benefit
• Special needs pension

Explanation of DFISA rate

The following explanation of how DFISA is calculated applies to those cases where the SSA compensation recovery rules do not apply.

For an explanation of the calculation of DFISA where compensation recovery is involved, see section 15.

The DFISA formula

DFISA is calculated as a daily entitlement, paid in fortnightly instalments.  DFISA is the difference between the notional rate of social security payment and the actual rate of social security payment.

DFISA = notional rate minus actual rate

Notional and actual rates

The daily rate of DFISA is the difference between the actual rate and the notional rate of the person's social security payment:

The actual rate – the daily rate of the person's social security income support payment under the SSA.

Note: this is the rate calculated before deductions (such as deductions for lump sum advance) or additions for remote area allowance are made.

The notional rate – what the person's daily rate of social security income support payment would be if the following applied:

•        adjusted DP was exempt income; but

•        adjusted DP was included in the calculation of any rent assistance entitlement.

Note: this is the rate calculated before deductions (such as deductions for lump sum advance) or additions for remote area allowance are made.

The notional rate

A person's notional rate is calculated by excluding the adjusted DP of the person and/or the person's partner from the assessment of their rate of social security payment.  This may lead to a notional increase in the person's rate of social security payment.

If the person rents, a notional rate of rent assistance (see below) may be included in the calculation of their notional rate. Where this is the case, the notional rent assistance rate is added to the maximum rate of payment before the income and assets tests are applied.

Notional rent assistance

Note: these steps are notional only.  There is no change to the person's actual payment of rent assistance.

If the person is entitled to rent assistance under social security law, the adjusted DP is used to calculate a rent assistance reduction amount in order to determine the notional rent assistance rate.  The rent assistance reduction amount is subtracted from the person's rent assistance rate to give the notional rent assistance rate.

Calculation of the rent assistance reduction amount uses the same taper rates and income free areas as apply to the person's social security income support payment.

The actual rate

The actual rate is the rate of payment as assessed under existing social security rules.  It is the amount payable to the person, including supplementary payments and rent assistance, but excluding remote area allowance (RAA) and any deductions such as deductions for lump sum advance.

For some people this rate will be nil.

No change in social security payment

It is important to note that the DFISA calculation does not change the person's existing social security assessment.

The notional assessment is only used for comparison with the actual rate to determine whether DFISA is payable.

No one will receive an increase in social security payment, or a reduction in rent assistance, as a result of this initiative.

Clients who will receive nil DFISA, or less than expected

Some clients will not receive any amount of DFISA even though they are eligible for DFISA.  Others may receive less than they thought they would receive as a result of the impact of adjusted DP on their social security payment.

There are two reasons that this may occur. These are:

• the client is notionally assets tested; or
• the client's notional RA assessment reduces their DFISA payment.

Section 13 of this DI, 'Explaining the DFISA calculation' includes examples of these situations.

Legislation – DFISA rate

The steps involved in calculating the DFISA rate are contained in section 118NC(1) of the VEA.

Who pays DFISA?

DVA pays DFISA in all circumstances, irrespective of whether Centrelink or DVA assesses the primary payment and calculates the rate of DFISA.

Who calculates DFISA?

A person's rate of DFISA is calculated by the agency that assesses their social security income support payment, either DVA or Centrelink.

“Centrelink DFISA” – Centrelink's role

Where Centrelink assesses the person's social security payment, Centrelink calculates the person's daily rate of DFISA. Centrelink transmits the daily rates to DVA.

DFISA paid to Centrelink customers is identified on the system as “Centrelink DFISA”.

“Centrelink DFISA” – DVA's role

Where Centrelink calculates DFISA, DVA calculates the fortnightly rate based on the daily rate transmitted by Centrelink.

DVA delivers the payment to the person's nominated account, and advises the person of the amount payable and the payment destination.

“DVA DFISA” – DVA's role

If DVA assesses the person's age or wife pension, DVA calculates the person's rate of DFISA.

DVA delivers the payment to the person's nominated account, and advises the person of the amount and the payment destination.

Social security assessments

The rate of DFISA is determined by the person's social security income support payment assessment.

Regardless of which agency calculates DFISA, the person's social security payment will not change.

Both agencies apply the same rules for calculating the DFISA rate. Therefore, the rate of DFISA is the same, whether DVA or Centrelink administers the social security payment.

Payment instalments

The first payment of DFISA was an instalment of 8 days entitlement, paid on 30 September 2004 for the period 20 September to 27 September 2004.

The first full instalment of DFISA, made up of 14 days of entitlement, was paid on DVA payday 14 October 2004.

Centrelink paydays

People receiving income support from Centrelink may receive their income support payment on any of the 10 working days in a fortnight.  This option is not available at DVA.  As DFISA is a DVA payment, DFISA will only be paid on DVA paydays.

This means that a person may receive their social security payment in one week, and receive DFISA in respect of the impact of adjusted DP in the following week.

Payment destinations required

Payment cannot be released if there is no current payment destination recorded for the person on the DVA system.

Some people who are to be paid DFISA will not have existing bank account details recorded on the DVA system.  This will occur with partners who are not currently in payment with DVA.  DFISA can only be paid to a bank account nominated by an authorised person.

Before the payment of DFISA can be released to a person they need to complete the payment destination details form (a standard letter) and return it to DVA.  When sending out this form, please enclose a reply paid envelope.

Agent and trustee arrangements

If the person would like their DFISA payments released into a bank account other than their own, they will need to complete form D2693, Application for Appointment of an Agent.

If the person's ill health, infirmity or age renders them unable to manage their affairs, a trustee may be appointed.  Form D2505 Application for Appointment of a Trustee must be completed and medical certificates provided as evidence.  If a trustee is appointed, the pensioner's DFISA payments will be released to the trustee.

Accrual while awaiting payment destination details

A person's DFISA payment will accrue in a period where there is an assessed rate, but payment cannot be released because there is no payment destination.

Once the required details are provided, the accrued DFISA payment can be released.  Any delay in providing or confirming payment destination details does not impact the person's eligibility for DFISA, or its payability.

Taxable status of DFISA

The taxable status of DFISA reflects the taxable status of the basic rate of social security income support payment for which the person is qualified.

For example:

• where DFISA is paid in respect of newstart allowance, DFISA will be taxable;
• where DFISA is paid in respect of disability support pension (DSP) to a person who is under age pension age, DFISA will be non-taxable.

Tax file numbers

DVA is not authorised to collect the tax file numbers (TFN) of DFISA recipients.  In some cases DVA will already have a record of the TFN, but where it is not already recorded it must not be requested for the purpose of DFISA.

All DFISA recipients will have had to disclose their tax file number when they applied for their income support payment, at either DVA or Centrelink, unless they had an exemption.

Payment summaries

At the end of each financial year, payment summaries will be sent to DFISA recipients who received a taxable DFISA payment.

Where DVA has the TFN recorded it will show on the payment summary.  Where DVA does not have the TFN a dummy number will show – this is not a concern for the ATO and people should be reassured that the certificate is valid.

New SSA subsection 23(1D)

Subsection 23(1D) of the Social Security Act 1991 (SSA) commenced on 20 September 2004.

This subsection provides that if a person's rate of social security income support payment is nil but would not be nil if:

• adjusted DP was exempt income; and
• an adjusted DP income test for rent assistance was applied,

then that person is taken to be receiving the social security income support payment at nil rate.

23(1D) and DFISA

This provision was inserted into the SSA to ensure that people receiving a nil rate of social security payment and receiving DFISA:

• are subject to the obligations applicable to their payment;
• are entitled to certain benefits associated with their primary payment; and
• do not have their claim for a social security payment rejected or their payment cancelled because their rate of payment would be nil.

The provision applies both to people actually receiving DFISA and to those who, although entitled to DFISA, have elected not to receive the payment.

Impact of 23(1D)

A person to whom ss23(1D) applies remains subject to all provisions of social security law applicable to a recipient of the relevant social security payment.

This occurs despite the person not actually receiving an amount of the social security payment.

Obligations

For example, such a person will be subject to the obligations applicable to that payment, including:

• reporting changes in income and assets and personal circumstances to Centrelink or DVA (depending on which agency is administering the social security payment); and

• continuing to satisfy activity tests (if applicable).

A person in this situation will not be eligible for a Commonwealth Seniors Health Card (CSHC) because they are taken to be receiving income support.

Entitlement to concessions

Such a person will also be entitled to all additional benefits available to the recipient of that payment.  These additional benefits include:

• concession cards (pensioner concession card or health care card); and
• telephone allowance.

RAA payable to some nil rate beneficiaries

Subsection 23(1D) does not authorise the payment of remote area allowance to a person receiving a social security payment at nil rate.  Eligibility for remote area allowance is extended to people covered by ss23(1D) through section 118NE of the VEA.

Under this provision, for the purposes of the remote area allowance provisions of the SSA, the rate of the payment or benefit such a person is taken to be receiving is taken to be greater then nil.

Provided that such a person meets all the other criteria for remote area allowance, this provision means that RAA will be payable.

Election

As DFISA is an automatic entitlement, there is no process for claiming payment.  However, a person can elect not to receive DFISA.  The election must be made in writing and can be withdrawn at any time.

Impact of election

The date of effect for the election is the day after the written request is received by DVA.  After that date, no DFISA payment will accrue.  The election continues until it is formally withdrawn.

Electing not to receive DFISA does not impact the person's social security payment in any way.  If a person elects not to receive DFISA there is no deprivation of income.

Election where no social security amount is payable

Where a person is receiving social security income support at a nil rate, and subsection 23(1D) of the SSA applies, their status as a social security recipient continues even if they elect not to receive DFISA.  Further information on ss23(1D) of the SSA is at section 6 of this document.

A person in this situation continues to be a social security recipient for the purposes of obligations, concessions, pension bonus scheme, etc. for as long as their qualification for the social security payment continues.

Withdrawing election

If a person decides to withdraw the election not to receive DFISA, the withdrawal must be in writing.

DFISA becomes payable only from the day after their withdrawal is lodged with DVA.

Retrospective increase in adjusted DP

A retrospective increase in adjusted DP may result in an overpayment of social security income support payments for the person and the person's partner.

Where a person has elected not to receive DFISA, and has not withdrawn this request prior to the date of effect of the adjusted DP increase, arrears of DFISA will not be payable for any time prior to the date of effect of the election withdrawal.

Recovery of DFISA overpayments

DFISA is a payment made under Part VIIAB of the Veterans' Entitlements Act 1986.  As such it is recoverable under section 205 of the VEA.

Recovery of overpayments from DFISA

With one exception (explained below), overpayments arising from other VEA payments or from SSA payments may be recovered from DFISA.

Some overpayments not recoverable from DFISA - partners

Adjusted DP is included as income in assessing social security payment.  Therefore, the payment of arrears of adjusted DP may lead to both a social security income support overpayment and to arrears of DFISA.  This may affect both the person and their partner.

Where the partner has an overpayment, that overpayment is, to the extent possible, to be recovered from the veteran's adjusted DP arrears, and not from any DFISA arrears payable to the partner. The legislative requirement to recover the partner's overpayment from the veteran's DP arrears, even where the partner has DFISA arrears, is contained in section 27A of the VEA.

The partner's overpayment can only be recovered from the veteran's DP arrears. If the veteran's DP arrears are insufficient to cover both the veteran's and the partner's overpayments then an overpayment recovery action is raised.

How to recover  social security overpayments

The following example illustrates how and from whom overpayments are recovered where the social security payment of a veteran and a spouse has been overpaid because of DP arrears and where DFISA is payable to both.

Veteran

Partner

Scenario

$10,000 DP arrears

$2,000 Age pension overpayment

$2,000 DFISA arrears

$2,000 Age pension overpayment

$2,000 DFISA arrears

Calculation

The amount to be released to the veteran is calculated as follows:

1. DP arrears minus veteran and spouse overpayment/s = DP arrears released ($10,000 - $4,000 = $6,000)

2. Veteran DFISA arrears + veteran DP arrears released = total amount released to veteran ($2000 + $6,000 = $8,000)

The partner's overpayment is recovered from veteran's DP arrears

Amount released to partner = partner's DFISA arrears ($2,000)

Amendment to bereavement payment provisions

The bereavement payment provisions of both the SSA and the VEA have been amended to take account of DFISA.  As a result of these amendments, if DFISA was payable to the deceased just prior to death, any bereavement payment that is payable in respect of that person will be increased to take account of the amount of DFISA that person was receiving.

There is no legislated DFISA bereavement payment, because the amount is taken into account in calculating the VEA or SSA bereavement payment required.

This occurs whether the bereavement payment is:

• made under the SSA or the VEA; and

• made in respect of a single or partnered person.

Two instalments

In some circumstances DVA will deliver a component of the SSA bereavement payment.  This is an administrative arrangement under which DVA pays part of the social security bereavement payment on behalf of the Department of Family and Community Services.

This arrangement enables DVA to recover any outstanding overpayments and minimises intrusion on the bereaved.  This arrangement will occur for both partnered and single bereavement payments.

Partnered bereavement payments

Where the surviving partner is eligible for a bereavement payment, the calculation of that payment is based on the amount of the pension or benefit the deceased was receiving just prior to death.  This will include any amount of DFISA the deceased was receiving. Two examples follow.

Bereavement payment made under SSA

Matthew and Patricia are married age pensioners, paid by Centrelink. They both also receive DFISA from DVA.

After Patricia's death Centrelink calculates the bereavement payment to be paid to Matthew under the SSA.  The amount payable is calculated on the basis of the amount of age pension Patricia was receiving prior to her death. This includes the amount of DFISA she was receiving at the time.  Centrelink delivers some of Matthew's bereavement payment and a portion is delivered by DVA.

Bereavement payment made under VEA

Judith and Richard are married.  Richard is a service pensioner. Judith was in receipt of disability support pension and DFISA.

After Judith's death, DVA makes a bereavement payment to Richard.  It is paid under the VEA and is calculated on the basis of the amount of disability support pension Judith was receiving prior to her death plus the amount of DFISA she was receiving at that time.  The entire bereavement payment is delivered by DVA.

Single bereavement payment

Where the deceased was receiving DFISA immediately before death and was either single or had a partner who was not receiving an income support payment, a bereavement payment is payable.  It is payable under the SSA because the deceased was receiving a social security payment at the time of death.  The bereavement payment is payable to such person as the Secretary of FaCS considers appropriate.

The amount of that payment is based on the amount of the pension or benefit the deceased would, if they had not died, have received on the payday after death.  For the purpose of calculating the bereavement payment, this includes any amount of DFISA the deceased would have received.

Example of single bereavement payment

Jonathan was a single age pensioner at Centrelink.  He was also receiving DFISA from DVA.  The bereavement payment payable in respect of his death is paid under the SSA.  The amount payable is calculating by reference to the total of the age pension that would have been paid to him on the payday after his death, if he had not died, and the amount of DFISA that would have been paid on that day.

Who should clients contact?

DFISA recipients can contact either DVA or Centrelink with queries about DFISA.

DVA's role

DVA staff can answer queries about the calculation and payment of DFISA where DVA calculated the rate of DFISA.

Where Centrelink calculated the daily rate of DFISA, DVA staff can answer questions about payment delivery and the calculation of the fortnightly instalment; that is, the daily rate transmitted by Centrelink, multiplied by the number of days in the pay period.

Centrelink's role

Centrelink staff can answer queries about the calculation of the rate of DFISA where Centrelink calculated the rate, but cannot answer questions about the delivery of the DFISA payment.

Centrelink Revesby team

Clients who contact DVA with a query that DVA cannot answer should not be transferred to Centrelink. Centrelink have established a team in the Revesby office whose role is to deal with DFISA.  This team is set up to provide support to internal DVA and Centrelink staff and will not be answering queries from the public.

Where necessary, therefore, DVA staff should liaise with the Revesby team. Where the query is reasonably straightforward, the DVA officer can ring the client back with the answer. More complex queries may require the Centrelink Revesby officer to contact the client.

Centrelink call centres are also expected to follow these protocols when receiving DFISA queries.

No decision about DFISA rate

There is no legislative decision made with regard to the rate of DFISA. The calculation of the rate of DFISA flows directly from decisions made regarding the person's social security income support assessment.

Variations and cessations in the rate of DFISA occur only when a person's social security income support payment varies or ceases.

Appeal DFISA by appealing SS payment

As a person's rate of DFISA is based on decisions made in relation to their social security income support payment, a person can indirectly appeal their rate of DFISA by seeking a review of a decision made in relation to their rate of social security payment.

Further avenues

If the person remains dissatisfied following the review of their social security income support payment assessment, the following options remain available:

• writing to the Ombudsman; or
• writing to the Minister.

Cases that cannot be resolved can also be referred to National Office Income Support Policy via the mailbox NAT Policy Advisings Income Support.

Pension loans scheme

The pension loans scheme (PLS) is a scheme under which a person can receive a pension top-up in the form of a loan. Clients are currently eligible for a payment under the PLS if the pension rate payable to them is payable at less than the maximum rate, and if either their income or assets reduced rate is not nil.

Pensioners receiving a part-rate or nil rate of pension can use the scheme to top-up their pension payments to either:

• the maximum rate they would be entitled to if the income/assets test were not applied (less any remote area allowance), or

• any lesser rate they nominate.

Changes to PLS

Since 20 September 2004, the maximum PLS amount a person can receive is reduced by any amount of DFISA that the person receives.  This ensures that a person receiving DFISA cannot receive a total payment of more than the maximum payment rate.

Examples of PLS

1. Mr Smith is a single age pensioner whose current rate of age pension is $201.72 per fortnight. He also receives $268.98 DFISA per fortnight, giving him a total payment of $470.70 per fortnight.

Mr Smith's total income support payments are equal to maximum rate age pension.  Therefore he cannot receive a pension loan.

2. Mr Harrison is a single age pensioner receiving $300 age pension and $50 DFISA.  Through the PLS he could increase his fortnightly payment to maximum rate.  This would give him an additional fortnightly payment of $120.70, calculated as follows:

Maximum rate ($470.70) – (age pension + DFISA) ($300 + $50) =.$120.70

Amendments to advices

Amendments were made to existing advices produced from the following processes:

• PIPS (including CCPS auto payment advices produced through PIPS) daily
• Sept SI & global MI and Shares refresh (also refer to DI C24/2004);
• British Pension & Foreign Pension automatic reassessments;
• Commonwealth Superannuation, DFRDB and State Superannuation automatic reassessments;
• $FORT
• Automatic interstate transfers - CRS
• Death Processing System (DPS)

New advices

In addition to above, new advices were implemented to support the daily batch Centrelink process.  New advices are produced for:

•       Centrelink commencements
•       Centrelink variations

• Centrelink cancellations.

Amendments to standard letters

Existing standard letters have been amended to include information relevant to DFISA. Some new standard letters have also been written and can be found either under the new tab named “Clink DFISA” or under one of the existing tabs.

AIS

Changes to systems as a result of DFISA are available in AIS.

Aged care

Adjusted DP will continue to be held in the assessment of income tested daily care fees for people in residential aged care. This is because it continues to be included in a person's social security payment assessment.

Clients who receive nil rate social security income support payment but to whom s23(1D) of the SSA applies are social security recipients.  Therefore, anyone in this situation who is an aged care resident is eligible to pay the subsidised pensioner rate for basic daily care fees.

Impact on FTB & CCB

Family Tax Benefit (FTB) and Child Care Benefit (CCB) entitlements may be affected by the receipt of DFISA.

FTB Part A and CCB are payable at the maximum rate to income support recipients. Clients who receive a nil rate social security income support payment and DFISA will be regarded as social security income support recipients and will therefore be entitled to maximum rate FTB Part A and CCB.

Some DFISA recipients may receive a slightly lower FTB Part B assessment because their DFISA will be included as income in the assessment of FTB B. However, the DFISA rate will always outweigh any decrease in the FTB Part B rate, so overall income for the family will increase.

One off payments

In some circumstances a person may be entitled to a one off payment of DFISA.  For example, this may occur where a person is eligible for a sickness benefit payment for a period of only a few days, and goes on and off payment within the one DVA payment period.

As an auto advice would not be produced in these circumstances, there is a standard letter under the 'Centrelink DFISA' tab in IS standard letters.

In this instance DFISA will be paid on the next DVA payday. If bank details are not already with DVA then a letter requesting the details needs to be sent.

Clients who will receive nil DFISA, or less than expected

Some eligible clients will not receive any amount of DFISA, or may receive less than they thought they would receive.

There are two reasons a person may be eligible for DFISA but the rate would be calculated as nil, or less than the amount they expected. These are where the person is:

• notionally assets tested; or
• receiving RA.

Calculating the notional assets tested rate

In the process of calculating the rate of DFISA, a notional assessment is done. This involves:

1. calculating the notional income tested rate and the notional assets tested rate; and
2. comparing the two rates.

The lower of the two rates is the notional rate.

Rate of DFISA if notional rate is assets tested

If the person's notional social security payment is the assets tested rate their rate of DFISA may either be less than expected or nil.

DFISA is the difference between the person's notional rate and their actual rate.  The notional rate may either be a notional income tested rate (where adjusted DP is excluded and a disability income test applied) or it may be the person's assets tested rate.

Where the notional rate is the assets tested rate the amount of DFISA will be less than the impact that adjusted DP is having on the person's social security payment.

Where the notional assets tested rate is the same as the actual income tested rate, the amount of DFISA will be nil.

Example of notionally assets tested rate

The following is an example of a notionally assets tested client whose rate of DFISA is less than the impact of adjusted DP on his actual rate.  Rates are as at 20/09/2004

Mr Lucas is a single homeowner receiving age pension paid by DVA. He receives 60% of general rate disability pension ($177.84 per fortnight) and has $122 per fortnight in other income. He has assets of $160,000.

Actual income tested rate$399.56

Actual assets tested rate  $449.70

Current rate payable $399.56 (income rate)

Notional income tested rate$470.70

Notional assets tested rate$449.70

Notional rate that would be payable $449.70 (assets rate)

DFISA = Notional rate (assets tested)  – Actual rate (income tested)

= $449.70 - $399.56

=$50.14

Mr Lucas's adjusted disability pension reduces his actual payment by $71.14. However, the rate of DFISA payable is $50.14.

Clients eligible for rent assistance

Where a person is eligible for rent assistance, their notional assessment involves a disability income test for RA. This test is similar to the test applied under the VEA to calculate rates of service pension for those who rent. Departmental Instruction 40, shortly to be issued, explains the disability income rent test applied to service pension and ISS.

The notional disability income test for RA involves calculation of a reduction amount that is applied to the person's RA entitlement.  The calculation uses adjusted DP only and refers to the income free area(s) and taper rate(s) applicable to the person's primary payment.

As a result of this test, the notional rent assistance amount included in the calculation of the notional rate may be reduced.

Note: this impacts the notional calculation only.  There will be no actual change to the person's social security payment or rent assistance payment.

Taper rates and free areas for notional rent assistance

When calculating notional rent assistance reference is made to taper rates and free areas.  These are the taper rate and income free areas that apply to the person's primary payment.

Taper rates vary from payment to payment.  Age, service and disability support pensions all have the same taper rate and free areas.  However, newstart for example has a lower free area, and higher taper rates, with two thresholds.

Example of DI rent test reducing DFISA to nil

The following is an example of a client whose rate of DFISA is nil because of the disability income test for rent assistance. Rates are as at 20/09/2004

Mr Fee is a single age pensioner paid by Centrelink. He receives 100% of general rate disability pension ($296.40 per fortnight) and has no other income. He receives $96.80 per fortnight in rent assistance from Centrelink.

Actual income tested rate$400.94

Actual RA$  96.80

Actual rate payable $497.74

Notional income tested rate$470.70

Notional rent assistance$  27.04

Notional rate                        $497.74

DFISA =Notional rate – Actual rate

= $497.74 – $497.74

=$0.00

Mr Fee's adjusted disability pension reduces his actual payment by $69.76. However, because of the notional disability income rent test the amount of DFISA payable is nil.

What is the DFISA Bonus?

The DFISA bonus is a VEA payment.

A person is entitled to the DFISA bonus if their social security pension bonus is reduced because of the inclusion of adjusted DP in the calculation of their age pension rate.

How is it calculated?

The DFISA bonus is the difference between:

• the amount of pension bonus received under social security law; and
• the amount of pension bonus that would have been received if adjusted DP had not been included in the assessment of age pension.

Any amount of DFISA bonus payable will be calculated automatically, using the adjusted DP details from the age pension claim. There is no need to claim the DFISA bonus separately.

Who calculates the DFISA Bonus?

If a person claims the pension bonus and age pension from Centrelink, then Centrelink calculates the amount of DFISA bonus and transmits the amount payable to DVA.

If a person claims the pension bonus and age pension from DVA, then DVA calculates the amount of DFISA bonus.

In both cases DVA pays the DFISA bonus.

DFISA bonus payable where DFISA not payable

It is possible for a person to receive a DFISA bonus but not receive ongoing DFISA payments.  Where the notional reduction in rent assistance equals the notional increase in age pension, no DFISA is payable.  However, because the pension bonus calculation does not take account of rent assistance a DFISA bonus payment may still be payable in this situation.

If this occurs and DVA does not have the person's bank account details, a letter requesting those details should be sent.

Who pays the DFISA Bonus?

DVA will pay the DFISA bonus, regardless of whether it was calculated by Centrelink or DVA.

Example

Mrs Phillips registered with Centrelink for the social security pension bonus scheme in March 2000.  On 27 March 2005 she claims the age pension and the pension bonus and a bonus of $15,000 is payable. The amount is reduced because of her husband's adjusted DP.

If adjusted DP were excluded from her age pension assessment she would have received a bonus of $18,500.

DFISA bonus= $18,500 - $15,000

= $3,500

Centrelink advise DVA to pay a DFISA bonus of $3,500.

Impact of DFISA bonus on pension bonus eligibility

Once a person has received a DFISA bonus they:

• can no longer be a member of either the social security law or VEA pension bonus scheme; and

• can never receive a pension bonus.

Impact of receipt of DFISA on pension bonus eligibility

Generally, if a person receives DFISA after the age at which they would otherwise become eligible for a pension bonus under the VEA or the SSA, they:

• can no longer be a member of either the social security law or VEA pension bonus scheme; and

• can never receive a pension bonus.

This does not apply if the primary payment of the person who received the DFISA was a carer payment.  That is, if their DFISA was paid in respect of

carer service pension or carer payment.

DFISA rate calculators

In most cases, DFISA will be calculated according to the formula explained in section 3 of this instruction.  However, if the DFISA recipient's social security payment is reduced because of the compensation recovery rules in Part 3.14 of the SSA, a separate formula is used.

DFISA formula for compensation cases

If the person's primary payment is subject to compensation recovery, both the notional rate and the actual rate are reduced before the rate of DFISA is calculated.  That is, to calculate DFISA in such a case:

Step 1. Calculate the person's actual rate

Step 2. Subtract the amount by which that rate is reduced under the SSA compensation recovery rules

Step 3. Calculate the person's notional rate

Step 4. Subtract the amount by which that rate would be reduced under the SSA compensation recovery rules if it were the person's actual rate.

Step 5 Subtract the result of step 2 from the result of step 4. This gives the rate of DFISA payable.

DFISA - compensation preclusion period

If a person has received a lump sum compensation payment which attracts a lump sum preclusion period under the SSA, no DFISA is payable.

This is because, during a lump sum preclusion period, the compensation affected payment is not payable. As a result, both their actual and notional rates of social security payment will be nil.