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11.6.2 Taxable Payments
Legislative definitions of taxable payments
The VEA does not define which payments made by DVA are taxable or non-taxable. This information is specified in the Income Tax Assessment Act 1997. The payments listed below are those specified as taxable in that legislation.
Taxable service pension
Service pension is taxable when paid on the following grounds:
- age,
- invalidity, once the recipient has reached age pension age,
- blinded once the recipient has reached age pension age,
- partner of an age service pensioner,
- partner of an invalidity service pensioner, once either the partner or veteran has reached age pension age,
- partner service pension paid to separated partners,
- partner of a carer service pensioner, and
- carer, once either the recipient or partner has reached age pension age and the partner is receiving invalidity service pension or was receiving it before they died. More ?
Allowances paid in conjunction with these pensions are not taxable.
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Note: The basic amount of pension supplement is taxable, but the other components of the pension supplement are not taxable. Pensions calculated under the transitional rules are apportioned as pension supplement components for income tax purposes.
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Taxable income support supplement
Income support supplement (ISS) is taxable when paid on the following grounds:
- age,
- invalidity, once the recipient has reached age pension age,
- dependent child,
- partner of an invalidity service pensioner, invalidity ISS recipient or disability support pensioner, once one partner has reached age pension age,
- partner of a DVA or Centrelink income support pensioner receiving a payment other than invalidity service pension or disability support pension,
- blinded, once the recipient has reached age pension age, and
- carer, once one partner has reached age pension age. More ?
Regardless of whether the client is paid under transitional arrangements, the minimum amount of ISS and allowances paid in conjunction with ISS are not taxable.
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Blinded Pensioners
Where blinded pensioners over pension age are paid under the notional income and assets tested rate, the taxable amount is the rate of service pension actually paid to the person. This is true even if this is a reduced amount.
War widow/widower and invalidity ISS
If a war widow/widower in receipt of invalidity ISS ceases to be permanently incapacitated for work, their ISS becomes taxable. Their eligibility for invalidity ISS is not affected.
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Veterans' Children Education Scheme (VCES)
VEA ?
Education allowance paid under the VCES in respect of a student who is 16 years of age and over is taxable income for the student, regardless of whether the payments are actually made to the:
- student,
- parent,
- guardian, or
- trustee.
Other education allowance payments are not taxable.
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Veteran Payment
The maximum basic rate of Veteran Payment is taxable for all recipients.
Note: The basic amount of pension supplement which is included as part of a veteran payment is taxable, but the other components of the pension supplement are not taxable
Without adequate means of support (AMS) pension
Any amount paid in addition to the basic or 'schedule amount' of without adequate means of support (AMS) pensions is taxable except when paid to parents who are under age pension age.
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Other taxable payments
In addition to those listed above the following payments also form part of a person's taxable income:
- education entry payment,
- Defence Force Income Support Allowance (DFISA) where the maximum basic rate of the social security payment on which the recipient's DFISA was based was taxable. DFISA ceased to be paid 1 January 2022.
Adequate means of support payments to parents that are not taxable
11.6.3/Non-taxable Income Support Payments
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.
Age Pension Age refers to pension age as defined under the Social Security Act 1991, that is, pension age for people other than veterans.
A person may be regarded as permanently blind in both eyes where:
- there is a total loss of sight; or
- visual acuity after correction with suitable lenses is less than 6/60 in both eyes on the Snellen Scale; or
- where, in the written opinion of an ophthalmologist, the visual field deficits and/or combination of deficits results in a visual impairment which is the equivalent of a corrected visual acuity measure of less than 6/60 in both eyes.
The Commission Guideline CM5829: Determining 'permanently blind', 'no useful sight' and 'blinded in both eyes' may be instructive in making a blinded/blindness determination.
A person's 'partner' is someone who is a member of a couple with that person.
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.
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.
Section 5F(1) of the VEA defines dependent child as having the same meaning as in the Social Security Act 1991. For income support purposes, dependent child is defined as:
Child under 16 years
- the pensioner has legal responsibility either alone or jointly with another person for the day to day care, welfare and development of the young person AND the young person is in the pensioner's care, or
- the young person is not a dependent child of someone else AND the young person is wholly or substantially in the pensioner's care.
A child under 16 years cannot be considered a dependent child if:
- they are not a full-time student, and
- their weekly income from any source is more than the amount specified in section 5(3)(c) of the Social Security Act.
Child 16 years or older
A young person who has turned 16 years but is under 22 years can still be a dependent child of the pensioner if:
- they are wholly or substantially dependent on the pensioner, and
- their income in the financial year will not exceed the personal income limit, and
- they are receiving full-time education at a school, college or university.
A child over 16 years cannot be considered a dependent child if:
- they receive a social security pension or benefit such as youth allowance, or
- their personal income is more than the amount specified in section 5(4)(b) of the Social Security Act.
Income includes earning from casual, part-time or full-time earnings.
Note: the meaning of a dependent child for DVA income support pension purposes is not the same as the meaning for Family Tax Benefit purposes.
A war widow/widower is generally a person who immediately before their partners death, was the partner of, or was legally married to:
- a veteran; or
- a person who was a member of the forces; and
- who is receiving:
- a war widow's/widower's pension; or
- a pension that is payable under the law of a foreign country that is, in the opinion of the Commission, similar to a war widow's/widower's pension.
Refer to 5E(1) of the VEA for the full definition.
Veterans' Children Education Scheme provides financial assistance and guidance in the education and training of eligible children as defined under section 116 of the VEA. Eligible children must be full-time students and be under 25 years of age at the time of application.
The VCES aims to encourage and assist eligible children to achieve their educational potential and prepare for suitable careers. The education allowance is not means tested, however, benefits cannot be paid to a student who is receiving other Commonwealth education assistance (including Youth Allowance), income support or assistance from any other similar scheme.
Veteran Payment is a income support payment paid to persons claiming a mental health condition under the DRCA or MRCA, who are incapable of working more than eight hours per week until their claim is determined.
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.
A form of pension that prior to 6 June 1985 was granted to the dependants of a veteran whose death was service related where those dependants were without “adequate means of support”. Dependants who could be paid the pension included the wife, husband, widow(er), child, parent or other members of the veteran's family. AMS pensions could also be granted to the invalid child of an incapacitated veteran.
From 6 June 1985, there have been no new grants of AMS pensions, however, a small number of AMS pensions are still in payment.
Education Entry Payment (EdEP) is a payment to assist eligible pensioners with the costs of enrolling in a course of study in order to develop their skills, obtain a qualification and improve their employment prospects. It is paid once a year in accordance with section 118AAC of VEA.
The information below is for historical reference only.
Defence Force Income Support Allowance (DFISA) ceased on 1 January 2022 because adjusted disability income became exempt income under the Social Security Act 1991. It was an income support payment paid by DVA to people whose income support payment under Social Security Law was reduced, or not payable, because of the impact of adjusted disability pension. DFISA was the difference between the person's existing entitlement, and what the entitlement would have been had adjusted DP been exempt, but was assessed in the calculation of rent assistance.