Frank does this most years around the same time. Kitchen table, a pen, the back of an envelope. Three numbers: what he and his wife bring in a fortnight, what their super account added up to at last check, and the number DVA says neither of those can go over. Most years the third number barely moves and the other two creep up, so the gap gets a little tighter every July.
This year he wrote all three down again and nearly put the Service Pension question away before he'd finished the sum. Then he noticed something he'd been getting wrong for years, and something else that had changed without him hearing about it.
What you need to know: Service Pension, from 1 July 2026
Income free area
Up to $226.00 a fortnight for singles, $396.00 combined for couples, before the Service Pension starts reducing.
Asset limits
Up roughly 3.5 to 3.6% across all four categories. Ordinary annual indexation, not a big shift.
Deeming rates also moved
Both up a full percentage point across two phased updates. This can offset some of the good news above for larger balances.
Disability Compensation Payment
Not counted in any of the above. It runs on its own rulebook, separate from the Service Pension entirely.
So many things change on 1 July, it's easy to lose track of which one this is
This year, several different 1 July changes landed close together, and it's easy for them to blur into one thing in your head. There was the MRCA reform, closing the DRCA and VEA to new compensation claims. There was the DRCA lodging window that closed the day before that. And separately, quietly, there was the Service Pension income test and asset test, which move every 1 July on their own schedule, indexed to the cost of living, whatever else is happening in the legislation that year.
None of what follows has anything to do with the MRCA reform. If you already receive a Service Pension, a Disability Compensation Payment, or a War Widow's or Widower's Pension, none of those were touched by the MRCA change, and none of them are touched by the threshold movement described here either. This article is about the separate number that moves every year: how much income you and your partner can have, and how much you can hold in assets, before your Service Pension rate starts to reduce.
What actually moved on 1 July 2026
The Service Pension income free area and assets value limits are indexed every 1 July. This year's movement:
| Test | 1 July 2025 | 1 July 2026 |
|---|---|---|
| Income free area, single | $218.00 / fortnight | $226.00 / fortnight |
| Income free area, couple combined | $380.00 / fortnight | $396.00 / fortnight |
| Asset limit, single homeowner | $321,500 | $333,000 |
| Asset limit, couple homeowner combined | $481,500 | $499,000 |
Non-homeowner limits moved by a similar amount. Across the board, the increase sits between roughly 3.5% and 4.2%. Worth naming plainly: that's ordinary cost-of-living indexation. It's the same kind of movement the limits get most years. It is not a sign the rules have loosened significantly, and it is not related to the MRCA reform happening at the same time.
The first thing most veterans get wrong: your DVA payment was never part of this sum
For years, Frank added his fortnightly Disability Compensation Payment into the income column before comparing it to the limit. Nobody told him not to. It felt like the obvious thing to do. It's DVA money, so surely it goes in the DVA sum.
It was never supposed to be there.
The Disability Compensation Payment, which most veterans still call the disability pension, and the Service Pension are assessed under two different rulebooks. The Disability Compensation Payment compensates for an injury or condition connected to service. It is not subject to the income test or the assets test at all, no matter how large it is. The Service Pension is the one that is means tested, because underneath it, it's built the same way as the Age Pension: an income support payment, not compensation for service.
So the income free area and asset limits in the table above only apply to the Service Pension side of things. A veteran's Disability Compensation Payment doesn't get added to the income column, and doesn't need to be declared as part of this particular test. It runs on its own rulebook entirely, separate from the one that decides your Service Pension rate.
Frank had been quietly disqualifying himself with money that was never counted
A fortnightly Disability Compensation Payment can be a substantial amount. Sitting it in the wrong column on your own working can make the gap to the Service Pension limit look a lot narrower than it actually is.
The second thing: a working partner changes the number, not the answer
Forget the version where a partner still earning a wage means there's no point applying. That isn't how the combined test actually works.
If you have a partner, DVA does assess your income and assets together as a couple, whether or not you keep your finances separate day to day. That part is real. What it decides is your rate of payment. It has nothing to do with whether you're allowed to lodge a claim in the first place.
A couple's combined income can sit anywhere up to $396.00 a fortnight (from 1 July 2026) before the Service Pension starts reducing from the maximum rate. Past that point, the payment tapers down by 50 cents for every dollar over, gradually, not all at once. A partnered veteran who assumed a working spouse ruled them out completely may actually sit somewhere on that taper, receiving a reduced rate rather than nothing at all.
The same logic applies to the assets test on the combined side: two people's assets are added together and compared to the couple limit, not each person's assets checked separately against the single limit. It's a different sum to the one many people run in their heads.
Before you get too pleased with the extra room
Here's the part worth sitting with before doing your own sum on the back of an envelope. The income free area and asset limits went up this year. So did the deeming rates, which is what DVA assumes your savings and investments are earning, regardless of what they're actually earning.
From mid-2025 to 2026, the lower deeming rate moved from 0.25% to 1.25%. The higher rate moved from 2.25% to 3.25%. Both rose by a full percentage point across two phased updates.
For a veteran with a modest amount in the bank, that barely registers. For a veteran holding a larger super balance in drawdown or a sizeable investment portfolio, DVA is now assuming more income on exactly the same balance than it did last year, and that can quietly eat into the extra room the higher free area just created. The two moves don't cancel out for everyone. They can, for some people, particularly anyone with meaningful financial assets outside a modest savings account.
Worth running the actual numbers rather than assuming the good news applies evenly across the board.
Who this actually changes something for
| Situation | What it means |
|---|---|
| Receiving Disability Compensation Payment, not applying for Service Pension | None of this affects you. Your payment was never income or asset tested. |
| Previously assessed as just over the old limits | Worth rechecking. The new limits may bring your figures under the threshold this year. |
| Assumed a working partner ruled you out, never applied | Worth checking properly. You may be eligible for a reduced rate rather than nothing. |
| Significant super or investments beyond a modest savings balance | Check both directions. The deeming rate rise may offset some or all of the benefit. |
| Well under the old limits already, on the maximum rate | Little practical change. Your full pension status remains intact, and your fortnightly payment will automatically increase with standard rate indexation. |
What's worth doing with this, practically
Run the sum again properly, with the actual rules rather than the version most people carry around in their head. Leave the Disability Compensation Payment out of the income column entirely. Count a partner's income as a couple, against the couple's income free area, not against the single figure. Apply this year's deeming rates to what you actually hold in savings and investments, not last year's rates.
Frank ran his own numbers again, properly this time: disability payment left out where it belonged, partner's income counted as a couple, deeming applied at the new rates on what they actually hold. The number that came back sat close enough to the cutoff that lodging an actual application made more sense than another year of guessing at the kitchen table.
Three separate systems, the Disability Compensation Payment, the Service Pension, and how a partner's income gets treated, are easy to blur into one sum on the back of an envelope. Getting the relationship between them right is exactly the kind of thing worth having someone map out properly, rather than working it out alone every July.
Frequently asked questions
Related guides
Two things almost no one tells you about your DVA and CSC money
How child support deductions and divorce splitting can reach DVA compensation and CSC invalidity pensions before you see them.
Most veterans think the Gold Card bar is higher than it actually is
The real MRCA impairment threshold, the lower-point pathways, and how the Service Pensioner under-70 route interacts with income and assets.
Your existing DVA claim is safe. Here's what actually changes on 1 July.
The separate MRCA reform explained, for anyone still unsure which 1 July change applies to them.
DVA & CSC advocacy: Lavender Bear
How Lavender Bear works with veterans to build the strongest possible claims file before lodging, and represents them if DVA refuses.
This article is general information only. It is not legal or financial advice. Lavender Bear is an independent platform and is not affiliated with DVA or any government agency. Figures are confirmed against dva.gov.au at time of publication; DVA reviews and adjusts these thresholds periodically, so confirm current figures directly with DVA or a veteran advocate before making a decision based on them. Consult a veteran advocate or DVA-accredited representative for advice on your specific situation.