The Defence Force Income Support Allowance (DFISA) was payable to people whose Centrelink income support payments were reduced due to the inclusion of the DVA adjusted disability pension in the income test. DFISA was designed to compensate for the reduction in payment.
However from 1 January 2022, DVA adjusted disability pensions are no longer included in assessable income. As a result, DFISA is no longer payable.
DFISA prior to 1 January 2022
DFISA was paid to people whose Centrelink income support payment was reduced or not payable because their or their partner’s adjusted disability pension was treated as income under the income test.
Adjusted disability pension includes:
- General Rate (payable in multiples of 10% up to 100%), Extreme Disablement Adjustment, Intermediate Rate and Special Rate disability pensions paid under the Veterans' Entitlements Act 1986 (VEA)
- increased rates of disability pension for amputation and blindness, paid under section 27 of the VEA, and
- permanent impairment payments and special rate disability pension paid under the Military Rehabilitation and Compensation Act 2004 (MRCA).
The assessment of adjusted disability pension differed depending on whether the client received the DVA service pension or the Centrelink Age Pension:
- DVA service pension – adjusted disability pension was exempt income
- Centrelink Age Pension – adjusted disability pension was included in assessable income.
Prior to 1 January 2022, clients received a payment called DFISA (Defence Force Income Support Allowance) to compensate for the reduction in Age Pension.
Example
Alan is a single homeowner receiving the Centrelink Age Pension.
In October 2021 he also received 60% general rate disability pension of $312.80 per fortnight. As adjusted disability pension was included in assessable income for Age Pension purposes prior 1 January 2022, Alan’s Age Pension was reduced to $876.90 per fortnight.
Alan then automatically received DFISA of $67.40 pf ($944.30pf – $876.90 pf) to compensate for the reduction in Age Pension.
From 1 January 2022, the disability pension ceased to be included in the income test and Alan’s Age Pension increased to $944.30pf. Alan no longer receives DFISA.
Legislative changes from 1 January 2022
From 1 January 2022, the DVA Disability Pension was removed from the income test for Social Security payments.
This simplified the way income support payments are calculated, indexed, and administered by DVA and Services Australia.
Three main changes from 1 January 2022:
- Disability Pension was renamed the Disability Compensation Payment.
- The renamed Disability Compensation Payment is exempt from the Social Security Act income test.
- Disability Income Rent Test was removed. As a result, some veterans and their families paying private rent received an increased rate of Commonwealth Rent Assistance; or became eligible for Rent Assistance.
Unleash in ways you never thought possible
Get in touch
For technical enquiries contact us
8:30am – 6pm AEST Monday to Friday.
Disclaimer
The information contained in this update is based on the understanding Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) and Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) has of the relevant Australian laws as at the article date. As these laws are subject to change you should refer to our website at www.cfs.com.au or talk to a professional adviser for the most up-to-date information. The information is for adviser use only and is not a substitute for investors seeking advice. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), no person, including AIL, nor CFSIL, accepts responsibility for any loss suffered by any person arising from reliance on this information. This update is not financial product advice and does not take into account any individual’s objectives, financial situation or needs. Any examples are for illustrative purposes only and actual risks and benefits will vary depending on each investor’s individual circumstances. You should form your own opinion and take your own legal, taxation and financial advice on the application of the information to your business and your clients.
Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.
AIL and CFSIL are also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.