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Non-taxable Income Support Payments
Invalidity service pensions
Invalidity service pension is not taxable when paid to a pensioner who is under age pension age.
Partner service pensions
Partner service pension is not taxable when paid to a pensioner who is:
- a partner of a veteran, where the veteran is paid service pension on the grounds of invalidity, and both the partner and the veteran have not reached age pension age, or
- below age pension age and is the widow/widower of a veteran who was receiving invalidity service pension immediately prior to their death.
Partner service pension becomes taxable when either:
- the veteran reaches age pension age (regardless of the age of the partner), or
- the partner service pensioner reaches age pension age.
Note: A veteran's invalidity service pension only becomes taxable when they reach age pension age. The age or tax status of the partner's service pension does not affect the veteran's taxable status.
Carer service pensions
Carer service pensions are non-taxable where:
- both the recipient and partner are below pension age and the partner is an invalidity service pensioner, or
- the person is below pension age and the deceased partner was receiving an invalidity service pension immediately prior to their death.
Income support supplement
Income support supplement (ISS) is non-taxable when paid to a war widow/widower who is:
- receiving ISS on the grounds of permanent incapacity (invalidity ISS) and is below age pension age,
- below age pension age and whose partner is also below age pension age and receives invalidity service pension, invalidity ISS or disability support pension from Centrelink, or
- receiving ISS as a carer and both the ISS recipient and the carer are below age pension age.
Exception to non-taxable income support supplement rule
When a recipient of invalidity ISS ceases to be permanently incapacitated for work, they retain eligibility for invalidity ISS, but the payments are no longer non-taxable.
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Income support payments for blind people
Service pension and ISS paid on the grounds of permanent incapacity because the person is blind are not taxable until the recipient reaches age pension age.
Remote area allowance
Remote area allowance is not taxable, however payments may reduce the amount of Zone Tax Offset (formerly Zone Rebate) a person is allowed under section 79A of the Income Tax Assessment Act 1936. For this reason, any amount of remote area allowance will be shown on the payment summary of a recipient, and the pensioner must be informed that payment of the allowance may affect their Zone Tax Offset (formerly Zone Rebate).
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Without adequate means of support (AMS) pensions and allowances
The basic or 'schedule' amount of without adequate means of support (AMS) pensions are not taxable at any time. An amount paid to parents in addition to the schedule amount is not taxable where:
- the mother or father is under age pension age, and
- eligibility for pension was based on the father's incapacity. More →
Allowances and other income support payments that are non-taxable
The following income support allowances are also non-taxable (including clients assessed under the transitional rules):
- tax-exempt pension supplement, which is:
- minimum pension supplement amount[glossary:,:] plus the remaining portion of the pension supplement amount that exceeds the basic amount of pension supplement, or
- minimum amount for income support supplement,
- 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 non-taxable.
DFISA ceased to be paid 1 January 2022, - rent assistance,
- bereavement payment in respect of service pension, and
- the fourteen day entitlement of service pension or income support supplement (ISS) payable when a pensioner who is not a member of a couple dies.
Note: For administrative purposes, the “remaining portion of the pension supplement amount that exceeds the basic amount of pension supplement” is shown as the pension supplement tax exempt amount (Pension Supplement Non Tx) in the processing systems.
Circumstances where invalidity income support supplement becomes taxable
Section 11.6.2 Taxable Payments
Chapter 3.2 Income Support Supplement (ISS) Eligibility
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's 'partner' is someone who is a member of a couple with that person.
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.
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.
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.
For service pensioners this is calculated by subtracting the person's pension supplement basic amount from their total pension supplement.
The minimum pension supplement is an annual rate and is paid fortnightly. From 1 July 2010, the minimum pension supplement became 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.
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.
Rent Assistance is an allowance which may be paid to a service pensioner, income support supplement (ISS) or veteran payment 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 service pension bereavement payment is an amount payable on the death of a pensioner to the partner, or in absence of a partner, any person that the Commission thinks appropriate. The amount of bereavement payment varies and depends on whether:
- the deceased was a member of a couple, and
- the partner was receiving an income support payment from DVA or Centrelink.
Refer to Division 12A of the VEA for the full definition.
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.