4.13.3.30 Effect of periodic compensation on the partner of a compensation recipient

Date of effect

This topic has effect from 20 September 2001.

Summary

From 20 September 2001 a 2000-01 Budget measure was implemented. Part of this measure removed the previous direct deduction rules for the partners of compensation recipients.

This meant that existing income tests under the social security law would apply to partners of compensation recipients.

This topic

This topic contains the following information on the effect of periodic compensation payments on a partner's CAP:

  • treatment of periodic compensation payments - compensation recipient receives or claims a CAP
  • treatment of periodic compensation payments - compensation recipient does not receive or claim a CAP but is qualified
  • calculation of excess compensation for partners' of compensation recipients
  • impact of non-economic periodic compensation payments
  • impact of economic periodic compensation payments
  • treatment of periodic compensation payments - non-independent youth allowees, and
  • dependency-based payments savings provision.

Treatment of periodic compensation payments - compensation recipient receives or claims a CAP

If the compensation recipient receives or claims a CAP, and is qualified, then the periodic compensation will only have an impact on the partner's rate if there is excess compensation after the dollar for dollar rate reduction is applied to the maximum basic qualified rate.

Excess compensation is defined as the amount by which the compensation payable exceeds the maximum basic qualified rate and the pension supplement from 20 September 2009 (not including PhA pre 20 September 2009) (applicable to the compensation recipient's age and circumstances).

Note: Where the dollar for dollar rate reduction does not reduce the CAP to $nil, the compensation recipient's partner's rate is calculated by taking into account the couple's ordinary income.

The following table explains how periodic compensation affects a partner in this circumstance.

If compensation recipient's CAP is … then the periodic compensation …
not reduced to $nil does NOT affect the partner's CAP.
reduced to $nil but there is NO excess compensation does NOT affect the partner's CAP.
reduced to nil AND there is an amount of compensation 'left over' (excess compensation) excess compensation is assessed as partner's own ordinary income.

Note: The partner's own ordinary income already calculated is increased by the excess compensation amount. The increased amount is then taken to be the partner's own ordinary income and the relevant income free area and taper rate is applied to that new amount to calculate the partner's rate.

Act reference: SSAct section 1174 Effect of periodic compensation payments on rate of partner's compensation affected payment

Policy reference: SS Guide 4.2.1.10 Pensions income test, 4.2.2 Benefits Income Test & Limits

Treatment of periodic compensation payments - compensation recipient does not claim a CAP

Where the compensation recipient does NOT claim a CAP a determination cannot usually be made regarding the person's qualification for a CAP. As there is uncertainty about which payment the compensation recipient is or may be qualified for, the application of this policy should be beneficial. The compensation should be treated as outlined in the following paragraph.

If a determination cannot be made regarding the compensation recipient's qualification for a CAP for reasons, other than the effect of SSAct Part 3.14, then the compensation is treated as ordinary income of the compensation recipient when calculating their partner's rate.

Act reference: SSAct Part 3.14 Compensation recovery

Calculation of excess compensation for partners' of compensation recipients

The following table explains how the excess compensation is calculated for the partners' of compensation recipients (as at 20 September 2009).

Compensation recipient How to calculate the partner's excess

Qualified for a CAP

  • The compensation payment is reduced by the maximum basic qualified rate.
  • The excess is then regarded as the partner's own ordinary income.
  • For pension purposes this excess amount is added to the partner's half of the couple's combined income.

Example: Joint income is $300 per fortnight (pf), partner's half is $150 pf, compensation excess amount is $100 pf, partner's total income is $250 pf less allowable $124 pf by 50% taper rate affecting income is $63.00 pf.

Not qualified for a CAP
  • No excess, compensation is regarded as ordinary income of the compensation recipient.

Note: The maximum basic qualified rate of the compensation recipient is used to calculate the partner's excess. This is not affected if the compensation recipient has other income.

Consistent with section 1173(1) and section 1173(2) of the SSAct, it is important to note that direct deduction is ONLY applied when the compensation recipient was NOT qualified for AND receiving a CAP at the date of incident/injury (DOI) - it is not related to qualification for a CAP at a later date. If the compensation recipient WAS qualified for AND receiving a CAP at the DOI, ordinary income rules are applied. If the compensation recipient does NOT claim a CAP, ordinary income rules (beneficial treatment) are applied when assessing income for the partner of the compensation recipient.

Act reference: SSAct section 1173(1) If (a) a person receives periodic compensation payments …, section 1173(2) The person's daily rate of compensation affected payment is reduced …

Policy reference: SS Guide 5.5.1.50 Partnered Pensioner, 1 Child, Partner Not a Recipient, 5.5.3 Samples of Allowance Rate Calculations - Partnered Recipient, 5.5.1.80 Partnered Pensioner Couple - Compensation Effect on Partner, 5.5.3.60 Partnered allowance recipient - compensation effect on partner, 5.5.4.40 PPP - compensation effect on partner

Impact of non-economic periodic compensation payments

If payments are non-economic payments they are treated as ordinary income of the compensation recipient.

Impact of economic loss periodic compensation payments

The following table explains the impact of periodic compensation payments if payments are economic loss payments.

If the compensation event occurs … then the payment is …
  • while the compensation recipient is on a CAP
  • treated as ordinary income of the compensation recipient.
  • prior to compensation recipient being on a CAP, AND
  • the compensation recipient IS qualified for any CAP, but for the action of Part 3.14 of the SSAct
  • a direct deduction from the compensation recipient's maximum basic qualified rate, AND
  • the excess is treated as partner's own ordinary income.
  • prior to the compensation recipient being on a CAP, AND
  • the compensation recipient IS NOT qualified for any CAP for other reasons than the action of Part 3.14 of the SSAct
  • treated as ordinary income of the compensation recipient.

Note: Combinations of SCAP and CAP couples are explained at 4.13.1.30.

Act reference: SSAct section 1174 Effect of periodic compensation payments on rate of partner's compensation affected payment

Policy reference: SS Guide 4.13.3.20 Effect of Periodic Compensation on a Compensation Recipient

Treatment of periodic compensation payments - non-independent youth allowees

The partner's excess periodic compensation does not affect the dependant youth allowee as ordinary income.

The SSAct provides that a non-independent youth allowee is not considered to be a member of a couple for among other things the operation of Part 3.14, the compensation recovery provisions.

Act reference: SSAct section 4(6A) A person who …

Policy reference: SS Guide 2.2.5.50 Discretion to Treat a Person as Not Being a Member of a Couple for a Special Reason

Dependency-based payments - savings provision

A special provision applies to the dependency-based payments (WP, PA) of some partners of compensation recipients, where the compensation recipient's CAP ceased to be payable AS AT 20 September 2001 as a DIRECT RESULT of the changes to the assessment of periodic compensation. The following table explains this provision.

If immediately prior to 20 September 2001 … then …
  • a partner was receiving a dependency based payment, AND
  • the partner was born on or before 1 July 1955, AND
  • the compensation recipient's CAP reduced to $nil as at 20 September 2001
  • the partner remains qualified and payable, AND
  • the excess periodic compensation (if any) is assessed as their own ordinary income.

Note: This special provision does not prevent the dependency based payment from being cancelled or ceasing to be payable for any other reason.

Act reference: SSAct section 1185 Special provision for certain recipients of dependency-based payments

Last reviewed: 12 August 2019