3.1.11.40 Working Credit Daily Calculation Examples

Introduction

This topic contains example calculations of working credit accrual and depletion on a daily basis.

Accrual

Example: Kynan is a single person receiving YA as a job seeker. He has no income from employment and has income of $25 per fortnight from investments. Due to a change in the deeming rate his income from investments increased to $30 per fortnight from day 8. He has 74.5 working credits.

Step Description Day 1 to 7 Day 8 to 14
1 Work out employment income for the day (by dividing employment income by the number of days in the entitlement period). Nil Nil
2 Multiply the amount determined in step 1 by 14. This is the employment income for the day expressed as a fortnightly rate. Nil Nil
3 Add any other ordinary income for the day (expressed as a fortnightly rate)to the employment income calculated in step 2. This is the fortnightly rate of total ordinary income for the day. $0 + $25 = $25 $0 + $30 = $30
4

Working credit cannot accrue if the fortnightly rate of total ordinary income on a day is $48 or more.

If the fortnightly rate of total ordinary income for the day is less than $48, working credit accrual for the day equals one-fourteenth of ($48 − the rate).

$48 − $25 = $23

$23 ÷ 14 = 1.6429

$48 − $30 = $18

$18 ÷ 14 = 1.2857

Note: Steps 1 & 2 cater for entitlement periods that are not 14 days.

Working credits accrued from:

  • Day 1 to 7 = 1.6429 × 7 = 11.5
  • Day 8 to 14 = 1.2857 × 7 = 9.0
  • Total accrued in fortnight = 20.5

New working credits balance

= current balance + working credits accrued this fortnight

= 74.5 + 20.5

= 95

Depletion

Example: Michael is a single person receiving NSA. He has employment income of $200 per fortnight and other ordinary income of $42 per fortnight. He has 95 working credits. He reorganised his investment portfolio that increased his other ordinary income to $115 per fortnight from day 5 in the fortnight.

Calculation for day 1

Step Description Day 1
1 Work out employment income for the day.

$200 per fortnight ÷ 14

= $14.2857

2 Work out the recipient's employment income for the day (expressed as a fortnightly rate) by multiplying the amount in step 1 by 14. $14.2857 × 14 = $200
3 Work out the recipient's rate of total ordinary income for the day (expressed as a fortnightly rate) by adding the amount calculated in step 2 to any other ordinary income for the day (expressed as a fortnightly rate). $42 per fortnight + $200 = $242
4 If the recipient's fortnightly rate of total ordinary income for the day exceeds the income free area, the working credit balance is depleted by the least of:  
  • the recipient's employment income, or
$14.2857
  • one-fourteenth of the amount by which the fortnightly total ordinary income exceeds the fortnightly ordinary income free area, or

$242 − $104 = $138

$138 ÷ 14 = 9.8571

  • the recipient' s available working credit balance.
95
5 Lowest amount as per step 4 is the amount of working credits depleted for the day. 9.8571
6

Work out new working credit balance

(Opening working credit balance − working credit depletion amount).

95 − 9.8571 = 85.1429

Note: Steps 1 & 2 cater for entitlement periods that are not 14 days.

Because there were no changes in income or circumstances from day 2 to 4, the daily depletion amount continues as 9.8571, therefore the working credit balance at end of day 4 would be 55.5716 working credits (95 − (4 × 9.8571) = 55.5716). On day 5 the investment income increases and a new calculation needs to be done to determine the working credit depletion for day 5.

Effect on entitlement - days 1 to 4

The other ordinary income of $42 per fortnight is below the income free area and the working credits offset the employment of $200 per fortnight, therefore there is no rate reduction.

Calculation for day 5 - change in investment income

Step Description Day 5
1 Work out employment income for the day.

$200 per fortnight ÷ 14

= $14.2857

2 Work out the recipient's employment income for the day (expressed as a fortnightly rate) by multiplying the amount in step 1 by 14.

$14.2857 × 14

= $200

3 Work out the recipient's rate of total ordinary income for the day (expressed as a fortnightly rate) by adding the amount calculated in step 2 to any other ordinary income for the day (expressed as a fortnightly rate).

$115 per fortnight + $200

= $315

4 If the recipient's fortnightly rate of total ordinary income for the day exceeds the income free area, the working credit balance is depleted by the least of:  
  • the recipient's employment income, or
$14.2857
  • one-fourteenth of the amount by which the total ordinary income exceeds the ordinary income free area, both on a fortnightly basis, or

$315 − $104 = $211

$211 ÷ 14

= 15.0714

  • the recipient's available working credit balance.
55.5716
5 Lowest amount as per step 4. This is the amount of working credit depleted for the day. 14.2857
6

Work out new working credit balance

(Opening working credit balance − working credit depletion amount).

55.5716 − 14.2857

= 41.2859

Note: Steps 1 & 2 cater for entitlement periods that are not 14 days.

As there were no changes in income or circumstances from day 6 to 7, the daily depletion amount continues as 14.2857 working credits. The working credit balance at the end of day 7 would be 12.7145 working credits. Because Michael will deplete his working credit balance to nil during day 8, a new calculation will be required.

Effect on entitlement - days 5 to 7

The employment income of $200 per fortnight is still offset due to the working credits and has no effect on the payment. However, investment income of $115 per fortnight is greater than income free area and his NSA will be reduced. To calculate the rate reduction, take the income free area away from his rate of investment income and times it by 0.5 (for the 50% NSA taper rate) and then divide it by 14 to get the daily reduction: (115-104) × 0.5 ÷ 14 = $0.3929 rate reduction for each day. Total rate reduction for days 5 to 7 is $1.18 (e.g. 0.3929 × 3).

The following table shows how Michael's working credits would be reduced to nil on day 8.

Calculation for day 8 - working credit depletes to nil

Step Description Day 8
1 Work out employment income for the day. $200 per fortnight ÷ 14 = $14.2857
2 Work out the recipient's employment income for the day (expressed as a fortnightly rate) by multiplying the amount in step 1 by 14.

$14.2857 × 14

= $200

3 Work out the recipient's rate of total ordinary income for the day (expressed as a fortnightly rate) by adding the amount calculated in step 2 to any other ordinary income for the day (expressed as a fortnightly rate). $115 per fortnight + $200 = $315
4 If the recipient's fortnightly rate of total ordinary income for the day exceeds the income free area, the working credit balance is depleted by the least of:  
  • the recipient's employment income, or
$14.2857
  • one-fourteenth of the amount by which the ordinary income exceeds the ordinary income free area, both on a fortnightly basis, or

$315 − $104 = $211

$211 ÷ 14

= 15.0714

  • the recipient' s available working credit balance.
12.7145
5 Lowest amount as per step 4. This is the amount of working credit depleted for the day. 12.7145
6

Work out new working credit balance

(Opening working credit balance − working credit depletion amount).

Nil

Note: Steps 1 & 2 cater for entitlement periods that are not 14 days.

During day 8, Michael's working credits are reduced to nil.

Effect on entitlement - day 8

On day 8 only part of Michael's employment income will be offset as he uses all his remaining working credits.

Step 1. Work out Michael's fortnightly rate of adjusted income for the day:

$14.2857 − 12.7145 working credits = $1.5712 per day,

$1.5712 × 14 = $22 fortnightly rate of employment income for the day.

Step 2. Add Michael's fortnightly rate of employment income to his investment income to find the adjusted total ordinary income:

$22 + 115 = $137

Step 3. Work out his NSA rate reduction for the day (note: as his income is less than $254 the 50% taper is applied):

((137 − 104) × 0.5) ÷ 14 = rate reduction for the day of $1.1786

Effect on entitlement - days 9 to 14

For days 9 to 14 there is no working credit depletion possible because the working credit balance is nil, so there is no adjustment to total ordinary income. Therefore total ordinary income = (200 + 115) per fortnight.

Rate reduction for the day = (((315 − 254) × 0.6) + 75) ÷ 14 = $7.97

$7.97 × 6 days = $47.82.

Michael's NSA rate is $538.80 per fortnight − (1.18 + 1.1786 + 47.82) = $488.62 (rates and income test parameters used applied as at 20 September 2017).

Last reviewed: 5 February 2018