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This topic provides information about:
The rate of ordinary income (1.1.O.30) is a required input to the rate calculation process for social security pension payments. This rate of ordinary income is the sum of the rates of the components of ordinary income. Employment income (1.1.E.102) is a component of ordinary income, as are financial investment income, deemed income and various other types of income.
Persons over age pension age receiving a social security pension have their employment income (1.1.E.102) assessed in the instalment period in which it is earned, derived, or received. The fortnightly amount of employment income is spread evenly across all days in the instalment period, regardless of which days, or the number of days, worked. Because a pension rate is calculated as an annual rate the fortnightly rate of employment income is converted to an annual rate for input to the rate calculation process.
If there is access to the work bonus the rate of ordinary income will be adjusted.
Act reference: SSAct section 8(1) Income test definitions, section 8(1A) A reference in this Act to employment income, in relation to a person..., section 8(1B) For the avoidance of doubt, if..., section 8(1C) For the purposes of paragraph (1A)(e), a leave payment..., section 1073A Employment income attribution over a period..., section 1073B Daily attribution of employment income, section 1073C Fortnightly or yearly expression of attributed employment income, section 1073AA Work bonus
Policy reference: SS Guide 1.1.E.102 Employment Income, 3.1.14 Work Bonus, 4.3.3.20 Income from Employment or Independent Contracting, 4.3.3.25 Employment Income for Pensioners of Age Pension Age from 20/09/2009
Employment income lump sums that represent a period greater than a fortnight are spread over the period to which the work relates.
Example: A contract-related employment income lump sum is spread over the period of the contract.
Employment income lump sums that are not in respect of any particular period but are paid for remunerative work are spread over a period of up to 52 weeks from the date the pensioner became entitled to receive the lump sum.
Example: A commission employment income lump sum.
Act reference: SSAct section 1073A(1) Employment income attribution over a period for social security pensioners
One-off, irregular or non-periodical LUMP SUM amounts, are apportioned as income over a 12 month period in 52 weekly amounts, if they are NOT remuneration, periodic payments, or an exempt lump sum.
Examples:
The date earned, derived or received is the date the person becomes entitled to receive the amount.
Some lump sum payments are exempt from the income test.
Example: Lottery winnings and commutations from a superannuation fund.
Exception: Periodical lottery winnings that are a series of payments under one contract - each instalment is assessed as income over the period it represents. For example, each instalment of $50,000 paid once a year would be held as income over 12 months.
Specific exemptions under section 8(11) can be found in 4.3.2.35 Income Exempt from Assessment - s 8(11) Exempt Lump Sums.
Note: The initial exemption of the lump sum amount from the income test does NOT mean that any on-going income generated by the lump sum is exempt, nor does it mean that the asset the lump sum turns into is exempt. The continuing assets and income tests treatment will be determined by how a person makes use of the funds. The funds may be used to obtain additional assets such as a car. For a purchase such as this the assets test would apply. Or, the funds may be placed in a financial investment. The funds have then become a financial asset (refer to section 9(1) of the SSAct for all the types of financial assets), assessable as an asset and subject to the income test deeming rules.
Act reference: SSAct section 8(8) Excluded amounts-general, section 8(11) An amount received by a person is an exempt lump sum…, section 9(1) Financial assets and income streams definitions
Policy reference: SS Guide 4.4.1.30 Scope of Deeming
Bona fide person borrowings (loans) are not income. A bona fide borrowing is one where money moves from the lender to the borrower, and there is an intention that the money be repaid.
Examples:
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Last reviewed: 2 August 2010
