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.
Circumstances where invalidity income support supplement becomes taxable
Section 11.6.2 Taxable Payments
Chapter 3.2 Income Support Supplement (ISS) Eligibility
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).
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.
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.