SRDP Case Studies: Understanding Payment Options for Medically Discharged Personnel

Mar 8, 2025

When military personnel are medically discharged, they have important financial decisions to make regarding their compensation options. This blog examines several case studies to illustrate how different payment options compare, helping veterans make informed choices about their financial future.

Case Study 1: Regular Personnel Discharged in July 2010

This case involves an ex-member who was medically discharged on July 2, 2010, with 50 impairment points and a lifestyle rating of 3 from warlike/non-warlike service.

Payment Details

Normal Earnings: $1,250.00 per week
Remuneration Amount: $135.46 per week
Superannuation Pension: $750.00 per week (Class A)
Adjustment: 75% (post 45 weeks)
SRDP Rate: $556.85 per week (tax-free)
Permanent Impairment Compensation: $148.67 per week

Option 1: Incapacity Compensation

Benefit	Amount ($ per week)
ADF pay	$1,250.00
+ Remuneration loading	$135.46
= Normal Earnings	$1,385.46
75% of Normal Earnings	$1,039.10
Less Commonwealth superannuation	– $750.00
Compensation payable	$289.10 (taxable) + $148.67 PI (non-taxable) = $437.77

Option 2: SRDP Option

Benefit	Amount ($ per week)
Current SRDP rate	$556.85
Less permanent impairment amount	– $148.67
Total SRDP that could be reduced	$408.18
Less 60% of Commonwealth superannuation (60% × $750.00)	– $450.00
SRDP payable	$0 (tax-free)

Invalidity Service Pension Calculations

Option 1: With Incapacity Compensation

Income	Amount
Commonwealth Superannuation	$750.00 per week ($1,500.00 per fortnight)
Incapacity payments	$289.10 per week ($578.20 per fortnight)
Total assessable income	$2,078.20 per fortnight
Income limit at which ISP ceases	$1,578.20 per fortnight
Invalidity service pension payable	$0
Total DVA payment per week	$289.10 Incapacity (taxable) + $148.67 PI (non-taxable) = $437.77

Option 2: With SRDP

Income	Amount
Current SRDP Rate	$556.85 per week
Less permanent impairment amount	– $148.67 per week
Total SRDP that could be reduced	$408.18
Exempt superannuation amount	$680.30
Assessable superannuation	$69.70 per week ($139.40 per fortnight)
Income free area limit	$146.00 per fortnight
Assessable income	$0
Maximum ISP payment	$364.65 per week
Total DVA payment per week	$364.65 ISP (non-taxable while under age pension age)

Total Payment Summary

	Incapacity payment option		SRDP payment option
	Taxable payment	Non-taxable payment	Taxable payment	Non-taxable payment
Superannuation	$750.00		$750.00
Incapacity payment	$289.10
SRDP				$0
PI		$148.67		$148.67
ISP		$0		$364.65
Total	$1,039.10 taxable	$148.67 non-taxable	$750.00 taxable	$513.32 non-taxable

Case Study 1A: Same Person with 80 Impairment Points

This case examines the same ex-member but with 80 impairment points, which increases the Permanent Impairment Compensation to $292.08 per week.

Option 1: Incapacity Compensation

Benefit	Amount ($ per week)
75% of Normal Earnings	$1,039.10
Less Commonwealth superannuation	– $750.00
Compensation payable	$289.10 Incapacity (taxable) + $292.08 PI (non-taxable) = $581.18

Option 2: SRDP Option

Benefit	Amount ($ per week)
Current SRDP rate	$556.85
Less permanent impairment amount	– $292.08
Less 60% of Commonwealth superannuation	– $450.00
SRDP payable	$0

Total Payment Summary with 80 Impairment Points

	Incapacity payment option		SRDP payment option
	Taxable payment	Non-taxable payment	Taxable payment	Non-taxable payment
Superannuation	$750.00		$750.00
Incapacity payment	$289.10
SRDP				$0
PI		$292.08		$292.08
ISP		$0		$246.79
Total	$1,039.10 taxable	$292.08 non-taxable	$750.00 taxable	$538.87 non-taxable

Case Study 2: Reservist Discharged in April 2007

This case involves a Corporal medically discharged from the Reserve on April 3, 2007, with 50 impairment points and a lifestyle rating of 4 from peacetime service.

Payment Details

Normal Earnings: $569.90 per week (National Minimum Wage)
Remuneration Amount: N/A
Superannuation: $0
Adjustment: 75% (post 45 weeks)
SRDP: $556.85 per week (tax-free)
Permanent Impairment Compensation: $86.75 per week

Option 1: Incapacity Compensation

Benefit	Amount ($ per week)
Normal Earnings (ADF pay)	$569.90
75% of Normal Earnings	$427.43
Compensation payable	$427.43 Incapacity (taxable) + $86.75 PI (non-taxable) = $514.18

Option 2: SRDP Option

Benefit	Amount ($ per week)
Current SRDP rate	$556.85
Less permanent impairment amount	– $86.75
SRDP payable	$470.10 (tax-free)

Case Study 2A: Same Reservist with 80 Impairment Points

This case examines the same ex-Corporal Reservist but with 80 impairment points, increasing the Permanent Impairment Compensation to $292.08 per week.

Option 1: Incapacity Compensation

Benefit	Amount ($ per week)
Normal Earnings (ADF pay)	$569.90
75% of Normal Earnings	$427.43
Compensation payable	$427.43 Incapacity (taxable) + $292.08 PI (non-taxable) = $719.51

Option 2: SRDP Option

Benefit	Amount ($ per week)
Current SRDP rate	$556.85
Less permanent impairment amount	– $292.08
SRDP payable	$264.77 (tax-free)

Important Notes for Veterans

Taxation Considerations: When making decisions, consider the total value of payments which are taxable versus non-taxable.
Invalidity Service Pension: Becomes taxable when a person reaches age pension age.
Incapacity Payments: These are payments for economic loss and may trigger compensation recovery provisions for recipients under pension age.
Relationship Status: For members in a couple, partner’s income will be included when determining ISP rates, and different income free areas apply.
Centrelink Interactions: Incapacity benefits attract dollar-for-dollar reductions against Centrelink Disability Support Pension (DSP).
DFISA: For those electing the SRDP option, the Defence Force Income Support Allowance (DFISA) may effectively reimburse reductions to DSP.

Each case is unique, and veterans should consider seeking financial advice before making decisions about their payment options.

Disclaimer: KSC is not affiliated with the Department of Veterans Affairs or Australian Defence Force.