The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication intended only as a guide to social security payments. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

4.3.5.60 About DVA compensation payments

Summary

This topic provides information about the following:

  • DVA - VEA, Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA)* and MRCA
  • compensation payments
  • MRCA Special Rate Disability Pension (SRDP) payment
  • how DRCA and MRCA affect other DVA payments
  • how DRCA and MRCA payments are assessed under the SSAct
  • superannuation used to reduce the rate of SRDP is excluded under the SSAct income test
  • superannuation used to reduce the rate of SRDP is assessed under SSAct hardship rules
  • how DRCA and MRCA payments are assessed under the FAAct, and
  • how specific compensation payments are assessed under the SSAct.

*The DRCA replicated the provisions of the Safety, Rehabilitation and Compensation Act 1988 (SRCA). Part 11 of the SRCA was modified so that from 12 October 2017, all defence-related claims are considered under the DRCA.

There are 4 Acts which provide compensation coverage for current and former members of the Australian Defence Force (ADF). They are:

The benefits a person may be entitled to when claiming for compensation will depend on:

  • the date on which the injury or illness occurred (for DRCA, DA and MRCA purposes), or
  • the period of service to which an injury or disease can be related, the type of service, and the period of time served (for VEA purposes).

DVA - VEA, DRCA & MRCA

DVA administers the VEA, the DRCA and the MRCA.

The VEA covers compensation payments for the following types of ADF service:

  • peacetime service (after completion of 3 year qualification period) - from 7 December 1972 to 6 April 1994. Members who enlisted before 2 May 1986 and were still serving after 7 April 1994 are also covered
  • all periods of operational service, peacekeeping service and declared hazardous service prior to 1 July 2004, and
  • warlike or non-warlike operations in East Timor, Afghanistan or Iraq or in any other similarly declared operation prior to 1 July 2004.

The DRCA is the compensation legislation that applies to current and former members of the ADF with conditions linked to service prior to 1 July 2004.

The MRCA applies to a person's injury, disease or death if the injury is sustained, the disease contracted or the death occurs on or after 1 July 2004 and the injury, disease or death related to defence service on or after 1 July 2004.

Veterans who were not in the ADF at 1 July 2004 continue to be covered under the VEA or the DRCA. People who are already entitled to compensation under the VEA, or who become entitled to compensation because of injury or disease sustained or suffered BEFORE 1 July 2004, are still entitled to receive compensation payments either through the VEA or DRCA.

Compensation payments

DRCA and MRCA compensation payments include incapacity payments for economic loss, permanent impairment payments for non-economic loss and a Special Rate Disability Pension (SRDP) payment (under MRCA). MRCA also has other benefits not provided under DRCA, such as potential access to a Repatriation Health Card (Gold).

MRCA SRDP

Former ADF members paid (or entitled to be paid) incapacity payments under the MRCA, who have a minimum level of impairment, are unable to work more than 10 hours per week, and for whom rehabilitation is unlikely to increase their capacity to work, will be offered a choice between a tax free SRDP payment for life or remaining on incapacity payments payable to age pension age. The maximum SRDP under MRCA is a periodic payment that is equivalent to the VEA Disability Compensation Payment at the Special Rate. DRCA and MRCA incapacity payments are economic loss compensation (i.e. income replacement payments) that are taxable when the income they are intended to replace is taxable. If the income is non-taxable (including Reserve pay or deployment allowances), the incapacity payment replacing that income will also be non-taxable. Tax status does not affect how the payments are treated under social security compensation rules.

The amount of SRDP actually payable is reduced, dollar for dollar, by the amount of permanent impairment payments paid under the DRCA and MRCA and VEA Disability Compensation Payment. The amount of SRDP payable is also reduced, at the rate of 60 cents in the dollar, by the Commonwealth-funded component of any superannuation which accrued whilst they served in the ADF.

Note: If the superannuation payment is received as a lump sum, it will be actuarially converted into a periodic amount.

How the SRDP is offset against other DVA payments and against superannuation is shown below. In combination, these offsets could often reduce the SRDP to zero.

Payment Effect on SRDP
MRCA incapacity payment

SRDP replaces this payment.

If an eligible person chooses to receive SRDP, they cannot receive an MRCA incapacity payment as well.

MRCA permanent impairment payment (expressed as a periodic payment) SRDP is reduced by this payment on a dollar for dollar basis.
VEA Disability Compensation Payment
(formerly disability pension)
SRDP is reduced by this payment on a dollar for dollar basis.

DRCA permanent impairment - paid as a lump sum

SRDP is reduced by this payment on a dollar for dollar basis. (Actuarially converted from a lump sum to a periodic payment).
Military superannuation (Government component only)

SRDP is reduced by this payment.

The Government-funded component of any superannuation which accrued whilst they served in the ADF (expressed as a periodic payment) is used to offset SRDP at the rate of 60 cents for each dollar. (Members' own contributions do not reduce SRDP.)

How DRCA & MRCA payments affect other DVA payments

The VEA continues to provide income support to entitled veterans. People who receive compensation under the DRCA or MRCA may also be eligible to receive income support paid under the VEA.

DRCA and MRCA incapacity payments are generally payable to age pension age and reduce VEA service pension payments on a dollar for dollar basis before Age Service Pension age, or qualifying age for VEA ISS recipients. For qualifying age, please refer to the definition provided at 5Q of the VEA.

DRCA and MRCA incapacity payments are counted as income when determining the rate of:

  • VEA ISS after qualifying age
  • Service Pension after Age Service Pension age, and
  • when determining financial hardship.

DRCA and MRCA incapacity payments are economic loss compensation (i.e. income replacement) payments that are taxable when the income they are intended to replace is taxable. If the income is non-taxable (including Reserve pay or deployment allowances), the incapacity payment replacing that income will also be non-taxable. Tax status does not affect how the payments are treated under social security compensation rules.

DRCA or MRCA permanent impairment payments and SRDP payments are not counted as income for VEA income support payment purposes. They are counted as income when determining financial hardship.

How DRCA & MRCA payments are assessed under the SSAct

People receiving DRCA or MRCA payments may be eligible to receive income support payments under the SSAct.

Payments under the DRCA or MRCA that contain an economic loss component (including incapacity payments but not SRDP) are compensation, as defined under SSAct section 17. This includes payments made within or outside Australia.

MRCA compensation for Wholly Dependent Partners (WDP), eligible young persons and dependants, which are paid as a lump sum, are not assessed as income for social security income test purposes. This is done under SSAct section 8(11) income test determination (Social Security (Exempt Lump Sums - Payments Compensatory in Nature for Non-Economic Loss) Determination 2017).

MRCA permanent impairment payments and SRDP are not assessed as income for social security income test purposes from 1 January 2022.

Some entitlements and payments made under the MRCA are subject to multiple entitlement exclusions under the SSAct. These payments include:

  • pharmaceutical allowance
  • a social security payment for which a pension supplement amount is used to work out the rate of payment
  • telephone allowance
  • assistance with the education of dependent children, and
  • a death benefit payable automatically to eligible dependants and funeral assistance.

Act reference: SSAct section 17 Compensation recovery definitions, section 552 Multiple entitlement exclusions, section 8(8)(zob) Excluded amounts-general

Policy reference: SS Guide 4.13 Compensation, 4.13.1.20 Assessment of compensatory type payments, 4.13.3 Periodic Compensation, 4.3.5.10 How income from DVA is assessed

Superannuation used to reduce the rate of SRDP is excluded under the SSAct income test

Only the residual military superannuation that has NOT been used by DVA to reduce the rate of SRDP is to be counted as ordinary income for social security income support payments.

Superannuation used to reduce the rate of SRDP is assessed under the SSAct hardship rules

Amounts of military superannuation that are excluded under the SSAct income test (because they have already been used to reduce the rate of SRDP paid under the MRCA) ARE counted as income when determining hardship under the SSAct.

Act reference: SSAct section 8(8) Excluded amounts-general, section 8(12)-'Special Rate Disability Pension reduction amount', section 1130 Application of financial hardship rules-pensions, section 1130C Application of financial hardship rules-pension PP (single), section 1132 Application of financial hardship rules-benefits

Military Rehabilitation and Compensation Act 2004

Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 Schedule 3 item 38, Schedule 3 item 39

Policy reference: SS Guide 4.3.5.10 How income from DVA is assessed, 4.3.5.30 Overview of DVA compensation payments, 4.6.7.130 Rate Calculation Under the Hardship Provisions

How specific compensation payments are assessed under the SSAct

The following table list payments made under the DRCA and MRCA and how they are treated as income for social security purposes.

Payment Treatment
DRCA payments for attendant care These payments are income.
MRCA payments for attendant care These payments are specifically excluded under the SSAct section 8(8) (y and zo).
MRCA reimbursement of costs

Not income.

Policy reference: SS Guide 4.3.2.10 Income received to cover specific expenses

MRCA permanent impairment payment, which is a payment (either as a weekly amount or a lump sum or a mixture of both) under section 68, 71, 75 or 80 of the Military Rehabilitation and Compensation Act 2004 (permanent impairment)

Not Income

For further information please see Exemption of certain DVA payments in 4.3.5.10 How income from DVA is assessed.

Act reference: SSAct section 8(8)(zoa) Excluded amounts-general

Policy reference: SS Guide 4.3.5.10 How income from DVA is assessed

MRCA compensation for certain eligible young dependants of deceased members NOT income.
MRCA permanent impairment additional payment for Veteran's with eligible young persons Exempt under SSAct section 8(8)(j).
MRCA lump sum compensation for dependants MRCA lump sum compensation payments for dependants are not assessed as income for social security income test purposes purposes. This is done under SSAct section 8(11) income test determination (Social Security (Exempt Lump Sums - Payments Compensatory in Nature for Non-Economic Loss) Determination 2017).

MRCA Special Rate Disability Pension under Part 6 of Chapter 4 of the Military Rehabilitation and Compensation Act 2004

Not income

For further information please see Exemption for certain DVA payments.

Act reference: section 8(8)(zob) Excluded amounts-general

Policy reference: SS Guide 4.3.5.10 How income from DVA is assessed

MRCA Motor Vehicle Compensation Scheme These payments are specifically excluded under SSAct section 8(8).
MRCA supplement Multiple exclusion applies.
MRCA Education and Training Scheme Excluded as income under SSAct section 8(8)(j) if paid to the parent; prescribed scheme is subject to multiple exclusion.

MRCA bereavement payments

(i.e. continuing permanent impairment, incapacity or SRDP payments)

  • Not income where paid to an adult.
  • 4.13.1.20 applies where paid to a child.
  • Where MRCA bereavement payment to eligible young person (EYP) is paid to an adult on behalf of the EYP, the payment is excluded under SSAct section 8(8)(j).
  • Where payment is received by the EYP
    • it is NOT excluded under SSAct section 8(8)(j)
    • it is not compensation under SSAct section 17(2).

Policy reference: SS Guide 4.13.1.20 Assessment of compensatory type payments

DRCA funeral costs Income (unless meets the criteria for treatment as a reimbursement).
MRCA funeral benefits Exempt under SSAct section 8(8)(zo).
DRCA household services Income (unless meets the criteria for treatment as a reimbursement).
MRCA household services Income (unless meets the criteria for treatment as a reimbursement).
DRCA medical treatment Income (unless meets the criteria for treatment as a reimbursement).
MRCA loss of or damage to medical aids Exempt under SSAct section 8(8)(k).

Act reference: SSAct section 8(8) Excluded amounts-general

Policy reference: SS Guide 4.3.2.10 Income received to cover specific expenses

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