Last updated 24 August 2011
SRDP CASE STUDY 1
Incapacity Payment Option
An ex-member who was medically discharged on 2 July 2010.
Normal Earnings$1,250.00 pw
Remuneration Amount$135.46 pw
Superannuation Pension$750.00 pw (Class A)
(Class A)
Adjustment %75% (post 45 weeks)
So the formula is:
75% x ($1,250.00 + $135.46) - $750.00 = $289.10 pw (plus $750.00 per week from Comsuper)
SRDP Option
SRDP$556.85 pw tax free
Permanent Impairment Compensation with 50 impairment points and a lifestyle rating of 3 from warlike/non-warlike service (as at 1 July 2010) is equal to $148.67 pw
Option 1 - Incapacity Compensation with 50 impairment points from warlike/non-warlike service
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| Option 2 – SRDP option with 50 impairment points from warlike/non-warlike service |
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| Benefit | $ per week |
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| Benefit | $ per week |
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| Normal Earnings: |
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| Current SRDP rate | $556.85 |
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| ADF pay | $1,250.00 |
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| Remuneration loading | $135.46 |
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| = | $1,385.46 |
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| 75 % of Normal Earnings = | $1,039.10 |
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| Less permanent impairment amount | - $148.67 |
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| = $408.18 |
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| Less Commonwealth superannuation | - $750.00 |
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| Less 60% of Commonwealth superannuation (60% x $750.00) | - $450.00 |
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| Compensation payable | $289.10 per week Incapacity (taxable) + $148.67 PI (non-taxable) = $437.77 |
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| SRDP payable |
$0 (tax free) |
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Invalidity Service Pension (rates current at 20 March 2011)
| Option 1 – Invalidity service pension with incapacity compensation and 50 impairment points from warlike/non-warlike service
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| Option 2 – Invalidity service pension with SRDP and 50 impairment points from warlike/non-warlike service |
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| $ per week |
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| $ per week |
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| Commonwealth Superannuation | $750.00 |
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| Current SRDP Rate | $556.85 |
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| (converted to a fortnightly amount) | $1,500.00 per fortnight |
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| Less permanent impairment amount
| - $148.67 |
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| Total SRDP that could be reduced by Commonwealth Super | = $408.18
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| Amount of superannuation payment used to reduce the SRDP figure to nil (as per the formula contained in 5I of the VEA)
| $408.18 X 10/6
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| Exempt amount under 5H(8)(zr) of the VEA | = $680.30 |
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| Amount of assessable superannuation (for invalidity service pension purposes) is therefore
| $750.00 – $680.30 |
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| = $69.70
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| Incapacity payments | $289.10 per week = $578.20 per fortnight |
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| Total assessable income ** Refer to notes below for further information. | $578.20 + $1,500.00 = $2,078.20 per fortnight |
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| Total assessable income (weekly) | $69.70 |
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| Homeowner with household assets of $10,000 – income test applies as assets under assets value limit |
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| Homeowner with household assets of $10,000 – income test applies as assets under assets value limit |
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| Pension calculation |
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| Pension calculation |
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| Income limit at which invalidity service pension ceases | $1,578.20 per fortnight |
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| Fortnightly assessable income | $69.70 (multiplied x 2) = $139.40 |
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| Yes |
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| N/A |
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| Invalidity service pension payable per week | $0 |
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| Invalidity service pension payable per fortnight (refer to 13.09 for further details regarding “income free area” and assessable income for ISP purposes)
| $139.40 - $146.00 (income free area limit) = $0 (assessable income)
Maximum ISP payment is $729.30 per fortnight (or $364.65 per week)
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| $289.10 Incapacity (taxable) + $148.67 PI (non-taxable) = $437.77 |
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= $364.65 ISP (non-taxable while the recipient is under age pension age)* See below.
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Total possible payments – Case Study 1
Incapacity payment option | SRDP payment option | ||||
| Taxable payment | Non-taxable payment |
| Taxable payment | Non-taxable payment |
Superannuation | $750.00 |
| Superannuation | $750.00 |
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Incapacity payment | $289.10 |
| SRDP |
| 0 |
PI |
| $148.67 | PI |
| $148.67 |
ISP |
| $0 | ISP |
| $364.65 |
Total payment option is therefore
| $1,039.10 taxable | $148.67 non-taxable
| Total payment option is therefore
| $750.00 taxable | $513.32 non-taxable |
* Invalidity service pension becomes taxable when a person reaches age pension age.
** Incapacity payments are payments in respect of economic loss and therefore may trigger compensation recovery provisions where the recipient is under pension age. For such cases, the amount of invalidity service pension payable to the compensation recipient is reduced on a dollar for dollar basis by the incapacity payments.
In making the decision about which payment option to pursue, the person would need to consider the total value of payments which are taxable and those which are non-taxable.
This case study assumes that the former member is single, and so the single income free area has been used.
If the former member is a member of a couple, then:
- their partner's income will be included in the assessment when determining the rate of invalidity service pension that can be paid;
- the “member of a couple” income free area must be used for the pension calculation; and
- their partner may be eligible for partner service pension. Partner service pension is a taxable payment once either the partner or veteran has reached age pension age.
SRDP CASE STUDY NO 1A
The same ex Private Pay Group 2, but assessed with 80 impairment points.
Permanent Impairment Compensation with 80 impairment points is equal to $292.08 pw
| Option 1 - Incapacity Compensation with 80 impairment points from warlike/non-warlike service
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| Option 2 – SRDP option with 80 impairment points from warlike/non-warlike service |
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| Benefit | $ per week |
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| Benefit | $ per week |
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| Normal Earnings: |
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| Current SRDP rate | $556.85 |
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| ADF pay | $1,250.00 |
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| Remuneration loading | $135.46 |
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| = | $1,385.46 |
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| 75 % of Normal Earnings = | $1,039.10 |
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| Less permanent impairment amount | - $292.08 |
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| Less Commonwealth superannuation | - $750.00 |
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| Less 60% of Commonwealth superannuation (60% x $750.00) | - $450.00 |
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| Compensation payable per week | $289.10 Incapacity (taxable) + $292.08 PI (non-taxable)
= $581.18
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| SRDP payable | $0 |
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Invalidity Service Pension (rates current at 20 March 2011)
| Option 1 – Invalidity service pension with incapacity compensation and 80 impairment points from warlike/non-warlike service
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| Option 2 – Invalidity service pension with SRDP with 80 impairment points from warlike/non-warlike service |
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| $ per week |
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| $ per week |
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| Commonwealth Superannuation | $750.00 |
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| Current SRDP Rate | $556.85 |
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| (converted to a fortnightly amount) | $1,500.00 per fortnight |
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| Less permanent impairment amount | - $292.08 |
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| Total SRDP that could be reduced by Commonwealth Super | = $264.77 |
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| Amount of superannuation payment used to reduce the SRDP figure to nil (as per the formula contained in 5I of the VEA)
| $264.77 X 10/6 |
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| Exempt amount under 5H(8)(zr) of the VEA | = $441.28 |
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| Amount of assessable superannuation (for invalidity service pension purposes) is therefore | $750.00 – $441.28 |
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| = $308.72 per week |
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| Incapacity payments | $289.10 per week = $578.20 per fortnight |
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| Total assessable income ** Refer to note field below for further information. | $578.20 + $1,500.00 =
$2,078.20 per fortnight |
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| Total assessable income | $308.72 |
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| Homeowner with household assets of $10,000 – income test applies as assets under assets value limit |
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| Homeowner with household assets of $10,000 – income test applies as assets under assets value limit |
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| Pension calculation |
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| Pension calculation |
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| Income limit at which invalidity service pension ceases | $1,578.20 per fortnight |
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| Fortnightly assessable income | $308.72 (multiplied x 2) = $617.44 |
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| Yes |
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| Invalidity service pension payable per week | $0 |
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| Invalidity service pension payable per fortnight (refer to 13.09 for further details regarding “income free area” and assessable income for ISP purposes)
| $617.44 - $146.00 (income free area limit) = $471.44 x 0.5 (taper rate reduction) = $235.72 per fortnight
$729.30 (maximum ISP rate) - $235.72 = $493.58 per fortnight (or $246.79 per week) |
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| $289.10 Incapacity (taxable)* + $292.08 PI (non-taxable) = $581.18 |
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| = $246.79 ISP (non-taxable while the recipient is under age pension age)* See below |
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Total possible payments – Case Study 1A
Incapacity payment option | SRDP payment option | ||||
| Taxable payment | Non-taxable payment |
| Taxable payment | Non-taxable payment |
Superannuation | $750.00 |
| Superannuation | $750.00 |
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Incapacity payment | $289.10 |
| SRDP |
| 0 |
PI |
| $292.08 | PI |
| $292.08 |
ISP |
| $0 | ISP |
| $246.79 |
Total payment option is therefore
| $1,039.10 taxable | $292.08 non-taxable
| Total payment option is therefore
| $750.00taxable | $538.87 non-taxable |
*Invalidity service pension is taxable once a person reaches age pension age.
Incapacity payments are payments in respect of economic loss and therefore may trigger compensation recovery provisions where the recipient is under pension age. For such cases, the amount of invalidity service pension payable to the compensation recipient is reduced on a dollar for dollar basis by the incapacity payments.
This case study assumes that the former member is single, and so the single income free area has been used.
If the former member is a member of a couple, then:
- their partner's income will be included in the assessment when determining the rate of invalidity service pension that can be paid;
- the “member of a couple” income free area must be used for the pension calculation; and
- their partner may be eligible for partner service pension. Partner service pension is a taxable payment once either the partner or veteran has reached age pension age,
SRDP CASE STUDY 2
A Corporal medically discharged from the Reserve on 3 April 2007. Normal earnings from part time civilian and reserve employment were less than the National Minimum Wage (NMW), so normal earnings have been assessed at the current rate of the NMW, $569.90 pw.
Incapacity Payment Option
Normal Earnings$569.90 pw
Remuneration Amount — N/A
Superannuation — 0
Adjustment %75% (post 45 weeks)
So the formula is:
75% x $569.90 = $427.43 pw
SRDP Option
SRDP$556.85 pw tax free
Permanent Impairment Compensation with 50 impairment points and a lifestyle rating of 4 from peacetime service is equal to $86.75 pw.
| Option 1 - Incapacity Compensation for a Reservist with 50 impairment points from peacetime service
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| Option 2 – SRDP option with 50 impairment points from peacetime service |
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| Benefit | $ per week |
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| Benefit | $ per week |
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| Normal Earnings: |
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| ADF pay | $569.90 |
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| Current SRDP rate | $556.85 |
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| 75 % of Normal Earnings = | $427.43 |
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| Less permanent impairment amount | - $86.75 |
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| Compensation payable | $427.43 Incapacity (taxable) + $86.75 PI (non-taxable) = $514.18 |
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| SRDP payable | $470.10 (tax free) |
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Note that incapacity benefits attract a dollar for dollar reduction against Centrelink Disability Support Pension (DSP) under the social security compensation recovery rules so DSP would not be payable to the recipient in option 1.
This person may be eligible for a DSP if s/he elects the SRDP option. SRDP is assessed under the ordinary income and assets test for DSP purposes. However, the amount that SRDP reduces DSP is effectively reimbursed in the form of the Defence Force Income Support Allowance (DFISA).
SRDP CASE STUDY 2A
The same ex Cpl Reservist but assessed with 80 impairment points.
Permanent Impairment Compensation with 80 impairment points is equal to $292.08 pw.
| Option 1 - Incapacity Compensation for a Reservist with 80 impairment points
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| Option 2 – SRDP option with 80 impairment points |
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| Benefit | $ per week |
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| Benefit | $ per week |
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| Normal Earnings: |
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| ADF pay | $569.90 |
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| Current SRDP rate | $556.85 |
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| 75 % of Normal Earnings = | $427.43 |
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| Less permanent impairment amount | - $292.08 |
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| Compensation payable | $427.43 Incapacity (taxable) + $292.08 PI (non-taxable) = $719.51 |
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| SRDP payable | $264.77 (tax free) |
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As mentioned in Case Study 1, the person would need to be clear about the total value of payments which are taxable and those which are non-taxable prior to making any decision.
Note that incapacity benefits attract a dollar for dollar reduction against Centrelink Disability Support Pension (DSP) under the social security compensation recovery rules so DSP would not be payable to the recipient in option 1.
This person may be eligible for a DSP if s/he elects the SRDP option. SRDP is assessed under the ordinary income and assets test for DSP purposes. However, the amount that SRDP reduces DSP is effectively reimbursed in the form of the Defence Force Income Support Allowance (DFISA).