When you pay taxes on your payments
This page contains information about the treatment of DVA payments for income tax purposes, Payment Summaries issued by DVA, the Medicare levy exemption and taxation withholdings.
On this page
- Tax File Number
- How is my DVA payment treated for Income Tax purposes
- Service pension, income support supplement, age pension, veteran payment and income support allowances
- What is pension age for taxation purposes?
- Disability pensions, war widow’s pension, orphans pension and allowances
- Payments under the MRCA and the DRCA
- When will Payment Summaries be issued by DVA?
- Do I need to lodge a tax return?
- What about the Medicare levy reduction or exemption?
- What about taxation withholdings?
Tax File Number
To help ensure that benefits are only paid to eligible persons, we compare our records with those of other government agencies. Your tax file number may be used for this purpose.
Access to your tax file number is restricted. If you lose or forget your number, you will need to contact the Australian Taxation Office (ATO).Back to top
How is my DVA payment treated for Income Tax purposes
Use the tables on the following pages to work out if your DVA payment is assessable income for income tax purposes.
The payments are listed in the following groups:
- service pension, income support supplement, age pension, veteran payment, and income support allowances;
- disability pensions, war widow’s pension, orphans pension and allowances; and
- payments under the Military, Rehabilitation and Compensation Act 2004 (MRCA) and the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA).
The following sections explain terms that are used in the tables.Back to top
Service pension, income support supplement, age pension, veteran payment and income support allowances
|Payment Type||Taxation status|
|Age Service Pension (service pension granted to a veteran on the basis of age)||Taxable except for the supplementary1 amount.|
|Invalidity Service Pension||Tax exempt2 if you are under pension age. Otherwise taxable except for the supplementary1 amount|
|Partner Service Pension||Tax exempt2 if:
Otherwise taxable except for the supplementary1 amount.
|Veteran Payment||Taxable except for the supplementary1 amount.|
|Income Support Supplement (ISS)||Tax exempt2 if:
Otherwise, taxable except for the supplementary1 amount.
|Pension Supplement||For taxation purposes, pension supplement basic amount is treated the same as the pension with which it is paid. Any amount of pension supplement above pension supplement basic amount is tax exempt.|
|Rent Assistance||Tax exempt2.|
|Remote Area Allowance||Tax exempt2 but it can affect the amount of tax offset available to you.|
|Bereavement Payment||Tax exempt2.|
|Energy Payments||Tax exempt2.|
|Education Entry Payment||Taxable.|
|Pension Bonus Scheme||Tax exempt2.|
|Pension Loan Scheme||Loan component of any amount received is tax exempt2.|
|Age Pension||Taxable except for the supplementary1 amount.|
|Defence Force Income Support Allowance (DFISA)||Tax status depends on whether the social security pension you receive is taxable or tax exempt2.|
*Note 1: - The supplementary amount of service pension, income support supplement, age pension payment or veteran payment is the total of:
- rent assistance; and
- additional amount for each of your dependent children (this does not apply for veteran payment); and
- remote area allowance; and
- tax exempt pension supplement.
*Note 2:- The term 'tax exempt' refers to income that is not subject to tax.
*Note 3: - The term ‘partner’ is defined in the Veterans’ Entitlements Act 1986 (VEA) in the context of a person who is a member of a couple. Partner Service Pension payable to a person who is legally married to, but separated from a veteran (for reasons other than illness or frailty) is taxable income, even if the person is under pension age.Back to top
What is pension age for taxation purposes?
Age pension age will increase by six months every two years until it reaches 67 on 1 July 2023. Your age pension age for taxation purposes depends on your date of birth.
Your age pension age is determined by the following table:
|If your date of birth is on or between:||Then your pension age is:|
|Before 1 July 1952||65 years|
|1 July 1952 to 31 December 1953||65 years and 6 months|
|1 January 1954 to 30 June 1955||66 years|
|1 July 1955 to 31 December 1956||66 years and 6 months|
|On or after 1 January 1957||67 years|
When a veteran’s service pension becomes taxable, their partner’s service pension also becomes taxable, regardless of the partner’s age.
*Note: - For taxation purposes, pension age is based on the age at which a person becomes eligible for an age pension. In assessing entitlement to benefits from DVA, a lower age known as qualifying age, may be used. Qualifying age has no relevance for the taxation assessment of payments.Back to top
Disability pensions, war widow’s pension, orphans pension and allowances
|Payment Type||Taxation status|
|Disability Pensions: General Rate (10% - 100%) Above General Rate including Intermediate Rate Extreme Disablement Adjustment (EDA) and Special Rate (T&PI, TTI)||Tax exempt.|
|Disability Pension Allowances, including: Attendant allowance Clothing allowance Decoration allowance Loss of earnings allowance Recreation transport allowance Vehicle Assistance Scheme Victoria Cross Allowance||Tax exempt.|
|Funeral Benefit||Tax exempt.|
|War Widow(er)s and Orphans pension||Tax exempt.|
|Energy Payments||Tax exempt.|
|Veterans supplement||Tax exempt.|
Payments under the MRCA and the DRCA
|Payment Type||Taxation status|
|Incapacity payments (MRCA and DRCA)||Taxable, except where the earnings being replaced are non-taxable. e.g. incapacity payments which replace part-time Reserve earnings and tax-exempt salary or allowances earned while on warlike service.|
|MRCA Special Rate Disability Pension||Tax exempt.|
|DRCA Permanent impairment payments||Tax exempt.|
|MRCA Permanent impairment payments||Tax exempt whether taken as periodic payments or converted to a lump sum.|
|MRCA compensation to wholly dependent partners||Tax exempt whether taken as a lump sum or as periodic payments.|
|MRCA compensation to eligible young persons||Tax exempt.|
|MRCA compensation to other dependants||Tax exempt.|
|MRCA supplement||Tax exempt.|
|Energy Payments||Tax exempt.|
|Compensation for household services, attendant care services, funeral costs, financial advice, treatment costs and vehicle schemes. (MRCA and DRCA)||Tax exempt.|
|Education Allowance - Veterans’ Children Education Scheme (VCES) and MRCA Education and Training Scheme (MRCAETS)||Tax exempt if you are under 16 years of age. Taxable if over 16 years of age except where the veteran is deceased, the MRCAETS recipient's payment is not taxable.|
When will Payment Summaries be issued by DVA?
If you receive a payment from DVA, we will send you a Payment Summary shortly after the end of each financial year.
The Payment Summary shows the amount of taxable income (gross taxable payments) you have received in that financial year, plus the total amount of any tax already withheld by DVA.
Your Payment Summary will also show the tax exempt payments you have been paid for the tax year. The tax exempt payments will be grouped into:
- Tax-free pensions and benefits – although exempt from tax, these payments are taken into account in assessing your entitlement to other government benefits and may need to be declared on your income tax return; and
- Other tax exempt payments.
If you are lodging a tax return, you no longer need to attach the original of your Payment Summary to your return. If you are lodging a final income tax return for a deceased estate, you will need to contact us for a Payment Summary. If you lose your Payment Summary, or if you do not receive it, contact DVA and we will issue a replacement.Back to top
Do I need to lodge a tax return?
You need to lodge a tax return if your taxable income, including the amount shown on your DVA or Department of Defence Payment Summary, is higher than the thresholds set by the ATO. If you are in any doubt, contact the ATO.Back to top
What about the Medicare levy reduction or exemption?
You will qualify for a Medicare levy exemption if you receive a pension because you are blind, or if you are entitled to a Veteran Gold Card
Your Payment Summary will show the number of days you are exempt from the Medicare levy.
If you are a low income earner, the ATO may reduce your levy. They will work out the amount of any levy you need to pay after you lodge your tax return.
If you are exempt from paying the levy and we do not need to send you a Payment Summary, we will send you a separate Medicare levy exemption certificate.Back to top
What about taxation withholdings?
You can have tax withheld from certain DVA payments by having all or part of the payment withheld and paid directly to the ATO. Simply write to DVA and tell us how much you want withheld each fortnight. To check if tax withholdings can be made from your DVA payment, please contact DVA.
You may also need to talk to the ATO first to find out what your tax liability will be. If the amount you request to be deducted exceeds your tax liability, you will need to lodge a tax return to claim your refund.Back to top