The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

3.12.1 Pension supplement - qualification & payability

Introduction

This section explains the qualification and payability requirements for pension supplement (1.1.P.155) through the following related issues:

  • qualification criteria
  • transitional arrangements
  • payability
  • quarterly pension supplement (1.1.Q.60)
  • rate of payment
  • income and assets test
  • taxation treatment
  • overseas absences.

Qualification criteria

The following table sets out the qualification criteria for pension supplement:

Payment Criteria under which pension supplement is paid

Age pension

Carer payment

 

Recipients receive pension supplement unless the transitional arrangements apply.

For transitional arrangements, see below.

Disability support pension

Disability wage supplement

Recipients must:

  • be over 21 years, OR
  • be under 21 years with one or more dependent children.

Note: Recipients under 21 without dependent children receive the YDS, NOT pension supplement.

For transitional arrangements, see below
Parenting payment (single)

Recipients who have reached the qualifying age for Age receive pension supplement.

Recipients under the qualifying age for Age receive pension supplement basic amount, which is the former GST supplement.

Parenting payment (partnered)

Austudy payment

Special benefit

 Recipients must have reached the qualifying age for Age.

Act reference: SSAct section 1064 to section 1068 Rate Calculators

Transitional arrangements

Pensioners receiving payments at 19 September 2009, who would have otherwise had a reduction in their pension as a result of the changes made to pensions from 20 September 2009 (i.e. increase in the income test withdrawal rate from 40 cents to 50 cents, removal of the dependent child disregard free area) may have their pension paid under 'transitional arrangements'. The transitional rate is based on the income test rules and payment rates (indexed to CPI) that applied before 20 September 2009. The pension paid to transitional pensioners includes the person's pre 20 September 2009 pension (including the GST supplement and PhA) together with the value of UA and the higher rate of TAL and an increase.

Transitional rate pensioners continue to receive pension under the transitional rules until the pension payable under the new rules is the same or higher than the transitional rate of pension.

Act reference: SSAct Schedule 1A Savings and transitional provisions

Policy reference: SS Guide 5.1.8.40 Pension reform - transitional arrangements

Payability

Pension supplement accrues, and is payable for, each day that a person qualifies for pension supplement.

Pension supplement is paid fortnightly, with the person's regular payment.

Act reference: SSAct sections 1064 to section 1068B Rate Calculators

Quarterly pension supplement

The pension supplement includes a component known as the minimum pension supplement amount.

From 1 July 2010, pensioners may elect to receive this minimum pension supplement amount on a quarterly basis, instead of fortnightly.

A pensioner who chooses this option will receive a reduced amount of pension supplement with their pension each fortnight. The minimum pension supplement amount continues to accrue daily, building up until one of the quarterly payment days occurs.

Payments of quarterly pension supplement will be made as soon as possible after 20 September, 20 December, 20 March and 20 June each year.

The quarterly pension supplement is payable in relation to each day on which an election is in force.

The amount paid will exclude any minimum pension supplement amount that has been paid fortnightly since the last test day. It will also exclude payment for any days for which the person was not eligible to receive the minimum pension supplement amount (e.g. if the person claimed a CSHC part way through the quarter).

Quarterly pension supplement instalments are calculated as follows:

  • Calculate the daily rate by dividing the annual minimum pension supplement amount by 364.
    • Note: The annual minimum pension supplement amount is set out in 5.1.9.10.
  • Multiply this daily rate by the number of days in the quarter that the person was eligible to receive the minimum pension supplement amount.

Act reference: SSAct section 1061VA Quarterly pension supplement, section 1061VB Rate of quarterly pension supplement

Rate of payment

The annual rate of pension supplement, minimum pension supplement amount and pension supplement basic amount is set out in 5.1.9.10.

The daily rate of pension supplement is calculated by dividing the annual rate by 364.

Act reference: SSAct section 20A Pension supplement rate definitions, Chapter 3 General provisions relating to payability and rates.

Income & assets test

Pension supplement is added to a pensioner's MBR before the income test is applied.

The minimum pension supplement amount is the last to reduce when the income test is applied. It is also the amount which remains payable if any pension supplement is payable after the application of the income and assets tests.

Act reference: SS(Admin)Act section 43(4) and section 43(5) Payment by instalments

Taxation treatment

For taxation purposes pension supplement basic amount (the former GST supplement) is treated the same as the basic pension it is paid with.

Example: Pension supplement basic amount for a DSP recipient who is under the qualifying age for Age, is exempt from tax. However, it is taxable if the DSP recipient has reached the qualifying age for Age.

Any amount of pension supplement above pension supplement basic amount is referred to as tax exempt pension supplement and is non-taxable.

Act reference: Income Tax Assessment Act 1997 section 52-15 Supplementary amounts of payments

Overseas absences - permanent departures from Australia

If a person's departure from Australia is permanent, only pension supplement basic amount (the former GST supplement) is payable.

Overseas absences - temporary overseas absences

Pension supplement is payable if a person is temporarily absent from Australia for a continuous period not exceeding the allowed portability period for the qualifying payment.

Where a person's qualifying payment can be paid overseas indefinitely, e.g. Age and DSP (for those with indefinite portability), only pension supplement basic amount (the former GST supplement) is payable after the first 6 weeks of a temporary absence from Australia.

Act reference: SSAct section 1064 to section 1068 Rate Calculators

Policy reference: SS Guide 7.1.2.20 Application of portability rules (portability table)

Last reviewed: