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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
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.
The ordinary income of a person for a period means, as described in section 46 of VEA, the gross ordinary income from all sources for that period without any reduction, other than a reduction of business income.
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.
The disability income rent test ceased on 1 January 2022. It was the method of calculating the amount by which a pensioner's rent assistance was reduced because of the disability income paid to them or their partner. The amount calculated was the RA reduction amount.
RA reduction amount = (disability income – rent assistance free area) x taper rate
Note: The rent assistance free area and taper rate were identical to those that normally applied to the person's income support payment and family situation.
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.
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