220.127.116.11 LIC - assessment of income
The LIC is a claimable concession card that can be issued to people who meet a particular income test. This topic covers the following related information:
- assessment of income
- income limits
- income for LIC purposes
- assessment of compensation for LIC purposes
- certain compensatory type payments
- LIC claimants with business income
- LIC claimants and gifting
- claimants receiving ABSTUDY
- LIC claimants subject to IMP
- income received to cover expenses.
Assessment of income
At new claim stage, a claimant's eligibility for a LIC is based upon their average weekly assessable income for the 8-week period before the claim. The 8-week assessment period ends on the claim date, having regard to any applicable deemed date of claim provisions. At LIC renewal (review of eligibility) stage, the 8-week assessment period runs between 12 and 4 weeks before their card expires (date is printed on automatically issued renewal forms).
While most LIC claimants have straightforward types of income such as salary and wages, a small percentage of claimants have varying forms of income such as from businesses, trusts or companies, shares or other investments, superannuation pensions and annuities, and so on. In ALL cases it is important to:
- identify the source and amount of a claimant's income
- identify the period that income is for, and
- include relevant income in the 8-week assessment period for LIC eligibility.
Examples: Andrew derives his income from interest on money deposited in bank accounts. His assessable income for the LIC would include 8 weeks worth of the deemed annual interest.
Terry and Cate are retired and receive bi-annual payments of a defined benefit pension. Their assessable income for the LIC would include 8 weeks worth of their annual pension amount, less any deductible amount. This is the same as the assessable amount under current social security rules.
Act reference: SSAct section 1071A HCC income test, section 8(1)-'ordinary income', section 1072 General meaning of ordinary income
A claimant's average weekly income must be under the 100% limit to qualify at either the new claim or renewal stage.
The income limit to retain the LIC after grant is 25% above the 100% limit, on an 8-weekly basis. If the average total weekly income over any 8-week period is equal to, or greater than the 125% limit shown below, then eligibility is reassessed and the entitlement to the LIC is withdrawn.
The table below shows the 100% and 125% income limits per week for the LIC. Limits are current from 20 September 2019 to 19 March 2020.
|Rate||100% limit per week||125% limit per week|
|Single (no children)||$564.00||$705.00|
|Couple, combined (no children)||$974.00||$1,217.50|
|Single, 1 dependent child||$974.00||$1,217.50|
|Couple combined, 1 dependent child||$1,008.00||$1,260.00|
|Add for each additional dependent child||$34.00||$42.50|
Explanation: The upper limit of the allowable income is actually the disqualifying amount.
Act reference: SSAct section 1071A HCC income test, section 1061ZO Qualification
Income for LIC purposes
A claimant's gross 'ordinary income' is the basis for assessment of eligibility for the LIC. However, certain other types of income and payments MUST ALSO BE INCLUDED as income for LIC purposes, even though they are not generally regarded as ordinary income. These include:
- a social security pension (1.1.S.220) or benefit (1.1.S.190) within the meaning of the SSAct, and
- if the person is receiving a social security pension or benefit within the meaning of the SSAct - the person's maintenance tested amount (if any), and
- a pension or ISS payable under the VEA, and
- a payment of DFISA payable under the VEA, and
- a payment received by a trainee in full-time training under LMPs (1.1.L.10), who is receiving NSA or YA, and
- a payment under NEIS, and
- a payment of compensation (1.1.C.240) within the meaning of SSAct section 17 (i.e. a lump sum and/or periodic payments).
Note: The above is NOT a comprehensive list of income included for LIC purposes.
Assessment of compensation for LIC purposes
The ordinary income test in SSAct Part 3.10 is used to assess compensation for the purposes of determining qualification for a LIC.
The gross amount of the compensation payment, without reduction, is assessed as income for the LIC.
Both the economic and non-economic loss components of the compensation payment are counted as income.
The following table shows how compensation is assessed for the LIC.
|Compensation that is paid …||uses the ordinary income test to …|
as a lump sum
apportion the gross lump sum amount, without reduction, across 52 weeks, from the day the person becomes entitled to receive it. This produces a gross weekly amount, which is counted as income over a 12-month period. Where any part of the period over which the income is apportioned, coincides with any part of the 8-week income assessment period for the LIC, the relevant income must be included.
Example: Jeff is awarded a lump sum compensation payment of $250,000 on 12/02/2014. The entire amount is assessed as income for a period of 12 months from 12/02/2014 to 11/02/2015, and is apportioned across 52 weeks to produce a weekly amount, of $4,807.69 (i.e. $250,000 ÷ 52).
Jeff applies for a LIC on 01/06/2014. His assessable income for the previous 8 weeks is $38,461.52 (i.e. $4,807.69 × 8).
assess the gross amount of periodic compensation payment. Where any part of the period for which periodic compensation is paid, coincides with any part of the 8-week assessment period for the LIC, the relevant income must be counted.
Example: Jenny receives $400 per week worker's compensation during the period 1 January to 30 June 2015. She applies for a LIC on 30 June 2015. Her assessable income for the previous 8 weeks is $3,200 (i.e. $400 × 8).
Act reference: SSAct section 1071A HCC income test, section 1071A-4 Definitions, section 17 Compensation recovery definitions, section 1073(1) Certain amounts taken to be received over 12 months
Certain compensatory type payments
Some compensatory type payments do not meet the definition of compensation in SSAct section 17(2) as they are not made wholly or partly in respect of earnings or lost capacity to earn resulting from a personal injury. These payments are not included as compensation income for the purposes of determining qualification for a LIC.
These compensatory type payments are, however, assessed as ordinary income for the purposes of determining qualification for LIC, unless they have been exempted as income under SSAct section 8(8) or section 8(11). There is a specific section 8(11) determination that exempts certain compensatory type payments from the income test (Social Security (Exempt Lump Sums-Payments Compensatory in Nature for Non-Economic Loss) Determination 2017).
Act reference: SSAct section 8(8) Excluded Amounts - general, section 8(11) An amount received by a person is an exempt lump sum if …, section 17(2) Subject to subsection (2B), for the purposes of this Act, compensation means …
LIC claimants with business income
If a claimant has business income, the annual income must be determined before the 8 weekly income can be established.
Example: Business income may be derived from:
- self-employment, such as a shop owner or primary producer, or
- income from assets or investments.
This annual amount is then divided by 6.5 to establish the claimant's assessable income over an 8-week period. Where a change in the claimant's income has occurred during the past year, an estimate of the claimant's current annual income must be made.
Example: A change could have occurred because of a downturn in business.
Act reference: SSAct section 1074 Ordinary income from a business - treatment of trading stock, section 1075 Permissible reductions of business income
LIC claimants & gifting
A person is not able to give away income or assets so that they can receive social security entitlements, including concession cards. Even though the LIC is not asset tested, deemed income from the disposal of an asset can be included in a claimant's assessable ordinary income.
The income treatment of scholarships for LIC purposes is the same as the treatment of scholarships for all other social security purposes - scholarships are treated as income unless specifically exempted.
Policy reference: SS Guide 18.104.22.168 Income from scholarships
Claimants receiving ABSTUDY
As payments of income support under the SSAct (such as YA and Austudy) are treated as income for the LIC, certain ABSTUDY allowances are also income for LIC purposes.
The following taxable ABSTUDY allowances are regarded as 'income support' and should be treated as income for LIC:
- living allowances (for students aged 16 years and over)
- additional assistance (paid as a fortnightly payment), and
- Masters and Doctorate living allowance.
There is also a range of other ABSTUDY allowances, which are non-taxable and NOT assessable as income for the LIC. Details of these can be found in the ABSTUDY Policy Manual.
Note 1: It may be necessary to confirm the amount of an arrears payment where its receipt could affect the claimant's eligibility for the LIC over a particular 8-week period.
Note 2: From 1 January 2019, a person receiving YA student or apprentice, Austudy or ABSTUDY living allowance qualifies for an automatic issue HCC.
LIC claimants subject to an IMP
Where a claimant is subject to an IMP for payment-related purposes, assessable income for LIC is determined by apportioning the (lump sum) payments over a 12-month period, from when they were received.
Example: Jacqueline ceases work and receives a total of 12 weeks ($6,000) of unused leave payments on 1 May. She claims NSA on 20 May and has an IMP. If she claimed a LIC, Jacqueline's assessable income for any part of her assessment period between 1 May this year and 30 April next year must include $115.38 per week of leave payments. ($6,000 of leave payments apportioned over 52 weeks from 1 May.)
Income received to cover expenses
Payment of an allowance from an employer for expenses is NOT included in income assessment.
- Allowances for travelling, clothing or meals.
- Allowances paid to people such as mayors, aldermen, council members and Justices of the Peace for out of pocket expenses.
- Allowances paid to ministers of religion (1.1.M.150) for out-of-pocket expenses associated with their ministry.
Exception: If the employer pays MORE than the amount actually incurred by the person, the extra IS included in the income assessment.
Policy reference: SS Guide 22.214.171.124 Income received to cover specific expenses