3.2.6 Tax Free Pensions or Benefits
Tax free pensions or benefits included in ATI
Even though an individual and/or their partner (1.1.P.30) may not pay taxes on some types of pensions or benefits, these amounts are included as part of their ATI (1.1.A.20) for FTB, CCS and SBP income test purposes.
Act reference: FAAct Schedule 3 clause 2 Adjusted taxable income
Tax free pensions or benefits
The following payments are tax free pensions or benefits that are included for the purposes of calculating ATI for an income year for FTB and CCS purposes and for calculating ATI for the relevant 6-month income test period for SBP.
- DSP where the individual is under age pension age,
- WP where both the individual and partner are below age pension age,
- CP where both the carer and the person being cared for are under age pension age,
- DVA invalidity service pension where the individual is below age pension age,
- DVA disability pension, war widow's and war widower's pension,
- DVA service pension and partner service pension where both partners are under age pension age and the veteran receives an invalidity service pension at the time of death,
- DVA income support supplement paid on the grounds of invalidity if the person is under age pension age,
- DVA DFISA, where DFISA is exempt from income tax,
- supplementary amounts of a DVA payment including RA, additional child amounts, RAA, pension supplement and ES,
- Special Rate Disability Pension safety net payment (SRDP) paid by the Military Rehabilitation and Compensation Commission,
- compensation for permanent impairment paid by the Military Rehabilitation and Compensation Commission,
- additional compensation for impairment from another service injury or disease paid by the Military Rehabilitation and Compensation Commission,
- interim compensation paid by the Military Rehabilitation and Compensation Commission while waiting for compensation payment for permanent impairment or additional compensation payment for impairment from another service injury or disease, and
- compensation for eligible widow partner paid by the Military Rehabilitation and Compensation Commission.
Note: The payments made by the Military Rehabilitation and Compensation Commission can be paid as fortnightly instalments or as a lump sum. Lump sums are deemed to be income only in the tax year they are received. For the SBP income test, a lump sum is only deemed to be income if received in the relevant 6-month income test period. For further details on how the income test period is defined for SBP see 4.15.1.
Tax-free pensions or benefits do not include bereavement payment, PhA, RA, Language, Literacy and Numeracy Supplement or RAA.
Payments not included in this topic are not tax free pensions or benefits for the purposes of calculating ATI.
Act reference: FAAct Schedule 3 clause 7 Adjusted taxable income - Tax free pension or benefit
Veterans' Affairs Legislation Amendment (Veteran-centric Reforms No.1) Act 2018 Schedule 2 Part 2 Consequential amendments
Income Tax Assessment Act 1997 section 52-65 How much of a veterans' affairs payment is exempt?, section 52-70 Supplementary amounts of payments
SS Guide 220.127.116.11 Taxation of Payments & PAYG Payment Summary - Individual Non-Business