4.3.5.40 About DVA war widow/ers pension, MRCA death benefits, DRCA death benefits & ISS

Summary

This topic provides information about the following:

• war widow/er's pension paid under the VEA
• death benefit payable to wholly dependent partners (WDP) under the MRCA
• lump sum payments to dependants of deceased veterans under the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA), and
• income support supplement (ISS).

VEA war widow/er's pension

A war widow/er's pension:

• is payable to eligible widow/ers of ex-service men or women, tax-free and free of the VEA income or assets tests
• is not affected if the widow/er commences a de facto relationship or remarries (see the dot points below under 'Social security treatment'), and
• can be paid until the war widow/er dies.

Social security treatment:

• A war widow/er cannot receive a social security pension or benefit if their war widow/er's pension was granted after 20 March 1995 and continues to be payable.
• If a war widow/er's pension ceases being payable (including zero rate), the widow/er may be eligible for a social security pension or benefit.
• A war widow/er’s pension is assessed as ordinary income for social security purposes for a recipient’s partner.

MRCA death benefit

The MRCA death benefit is payable, tax-free and free of DVA income or assets tests, to eligible wholly dependent partners of deceased members or former members of the Australian Defence Force (ADF). A partner living with the member immediately before the member's death is regarded as being wholly dependent on the member for economic support without having to establish the dependency for economic support.

The widowed partner has the choice of receiving a periodic payment equivalent to the VEA war widow/er's pension or its lump sum equivalent or a mixture of both.

A person who has received a lump sum mentioned in the MRCA paragraph 234(1)(b), or is receiving a weekly amount mentioned in that paragraph comes under the definition of:

• an armed services widow/er under the SSAct
• a war widow/er under the VEA.

Social security treatment:

• Recipients of MRCA death benefit for wholly dependent partners, either ongoing or lump sum, cannot receive a social security pension or benefit from the date of DVA's decision to grant a payment.
• Ongoing MRCA death benefit payments are assessed as ordinary income for social security purposes for a recipient's partner.

MRCA additional death benefit

This is an age-based lump sum payment paid in addition to the MRCA death benefit where liability for the member's death has been accepted as related to ADF service rendered on or after 1 July 2004. It is tax-free and free of the VEA income and assets tests.

Additional death benefit is not assessable under the SSAct or for the purposes of Family Assistance payments.

DRCA lump sum payments to dependants of deceased employees

Under the DRCA section 17, lump sum payments are made to dependants of deceased employees payable on death of the employee.

These payments are considered as an exempt lump sum and are not assessable under the SSAct. This exemption is provided for in Social Security (Exempt Lump Sums - Payments Compensatory in Nature for Non-Economic Loss) Determination 2017.

ISS & social security pensions & benefits

VEA ISS is an income and asset tested DVA payment paid to a war widow/er - this includes someone who receives a VEA war widow/er's pension or a MRCA death benefit as a wholly dependent partner. ISS commenced on 20 March 1995.

A social security pension or benefit is not payable if a war widow/er is receiving ISS or would be eligible for ISS if they made a claim.

War widow/er's pension granted BEFORE 20 March 1995

If a person was granted both a social security pension (Age, WP, DSP and CP) and the war widow/er's pension BEFORE 20 March 1995, they could elect to:

• start to receive ISS, or
• continue to receive Age, WP, DSP or CP at a rate frozen at that date.

For most people who are war widow/ers the frozen rate of the social security pension is $124.90 a fortnight. Those people who were in receipt of a higher rate of pension in 1986 had their maximum rate frozen at the higher level. A person's income and assets can result in a lesser amount of pension being paid. SSAct section 1065(5) restricts blind war widow/ers from receiving a higher rate than the same ceiling rate applicable to pensioners who are not blind.

War widow/ers receiving frozen rate pension do not have their social security pension indexed. However, they can transfer to DVA and receive indexed ISS if they satisfy eligibility and payability rules. When ceasing a social security pension and commencing ISS, it is important that there are no gaps in the person's payments. The social security pension should be paid up until ISS commences.

War widow/er's pension (or MRCA death benefit) granted AFTER 20 March 1995

If a person was granted the VEA war widow/er's pension AFTER 20 March 1995 or a MRCA death benefit as a wholly dependent partner, they may:

• receive ISS subject to the income and assets tests and eligibility criteria set out in the VEA section 45A, and
• are precluded from receiving social security pensions or benefits.

Social security pensions are not payable from the date:

• the war widow/er is determined to be eligible for ISS
• war widow/er's pension is payable.

Income test treatment of ISS for partner

ISS payments are NOT treated as income in assessing a partner's social security entitlement.