Income

Contributed by Danny Shaw and Dianne Anagnos and current to 1 September 2005

The Social Security Act defines income very broadly. It includes, among other things:

• salary and wages
• interest on bank or building society deposits
• dividends from shares (s.8(1)).

Most types of income are usually assessed at the time the income is being earned, even though the person may not yet have received the money.

GROSS INCOME OR TAXABLE INCOME?

Whether gross or taxable income is taken into account when assessing income depends on the type of payment and the source of the income.

WHAT IS NOT ‘ORDINARY INCOME’

Many forms of income are excluded from the definition of ‘ordinary income’ (s.8), and are either assessed under different rules or disregarded.

Telling Centrelink about income

Even if a person getting social security assistance believes that income they receive is exempt income, or is not enough to affect their rate of payment, they should tell Centrelink that they have received it.

Examples of exempt income are:

• payments under certain Acts, such as the Handicapped Persons Assistance Act 1974;
• returns on superannuation in rollover funds until the person reaches age pension age, or starts to receive an annuity from the fund;
• restitution paid by the German or Austrian government to victims of National Socialist persecution; and
• jury duty payments.

DEEMED INCOME ON INVESTMENTS

The Act provides for the assessment of an assumed rate of return on certain sums of money, and on financial investments.

What is a ‘financial investment’?

Financial investments include:

• money on deposit
• managed investments
• listed securities
• the outstanding balance of a loan that has not been repaid in full
• an unlisted public security
• gold, silver and platinum.

The deemed rate of return

The assumed or deemed rate of return reflects current interest rates, and is determined by the minister (Social Security Act s.1082).

Check with Centrelink

It is advisable to check with a financial information service officer at Centrelink for the current deemed rates and threshold amounts. These officers are at Centrelink area offices and at some local offices.

PERIODIC ASSESSMENT OF INCOME

Income for some pensions is assessed on an annual basis. For other pensions, and for allowances, it is assessed on a fortnightly basis.

Pensions assessed on an annual basis

Pension rates are usually assessed on an annual basis, and all income (regular or variable) is generally annualised (calculated as a per annum figure based on income in a particular period).

Pensions assessed on a fortnightly basis

Pensioners of working age (that is, people receiving a pension other than the age pension and not studying full-time) whose income varies must report their income fortnightly. Centrelink sends out a reporting and income statement every 12 weeks setting out the reporting dates.

Allowances

Allowances are assessed on a fortnightly basis.

• Employment income is assessed in the fortnight of the days worked, not when the earnings are actually received.
• Other types of income, such as investment income and income from self-employment, may be apportioned over longer periods.

Most people earning employment income while receiving an allowance must report it fortnightly. Requirements depend on the type of allowance. People receiving newstart allowance or youth allowance, and some people receiving special benefit, must complete a fortnightly application for payment form that requires full details about income whether or not a change has occurred.

People receiving other allowances while earning a variable income are sent a reporting and income statement every 12 weeks setting out the dates for income reporting.

Working credit

The amount of income from employment or self-employment that affects a person’s rate of payment may be reduced by the ‘working credit’ system. This system mainly affects people with fluctuating earnings, such as people with casual jobs who work different hours each week, or those who work full-time for a few weeks a year. These credits are used to increase the income ‘free area’ applied when a person earns income above the usual ‘free area’ amount (Social Security Act ss. 1073F, 1073H).