4.3.2.30 Income exempt from assessment - legislated

Summary

This topic provides information about the following income with legislated exemption from the income test:

  • free or discounted accommodation
  • value of board or lodging
  • value of emergency relief or like assistance, including natural disaster funds treatment of compensation and insurance payments for buildings, plant or personal effects
  • payments from medically acquired HIV trusts
  • private health insurance rebate
  • blocked income
  • payments exempted under international agreements
  • NEIS payments
  • NDIS amounts and returns on NDIS amounts
  • exempt funeral investments (funeral bonds)
  • rental income from former principal home for aged care residents
  • treatment of Australian Defence Force Reserve payments
  • exempt lump sums
  • other exempt income
  • exempt income for PP
  • Western Australian Government Cost of Living Rebate Scheme and Country Age Pension Fuel Card
  • paid parental leave
  • seasonal work living away and travel allowance
  • seasonal horticultural work income exemption, and
  • payments under the National Redress Scheme for Institutional Child Sexual Abuse Act 2018.

Information about other income exempt from assessment, which has been specifically approved, can be found in 4.3.2.31.

Information about changes to the pension income test in the Budget 2009-2010 can be found in 4.2.1.10.

Note: Generally, DSP recipients who are permanently blind are not subject to the income test. However, their DSP may be affected by the special arrangements for compensation payments.

Policy reference: SS Guide 4.3.1.30 Rate of income - couples, blind pensioners & children

Free or discounted accommodation

When a person receives free or discounted accommodation, the value of the free or discounted accommodation is NOT income for social security purposes. See below under 'Value of board or lodging'.

Value of board or lodging

The value of board and lodging is not income for social security purposes under SSAct section 8(8)(za).

Example: Where a person receives free accommodation, board or lodging.

Where a person receives a reduction in the rent or charge for accommodation or a reduction in the rent or charge for board or lodging, the value of this reduction is NOT income for social security purposes.

Note: Where a person receives a direct payment in cash, for the purpose of meeting the costs of their accommodation, board or lodging expenses, this IS income.

Examples of the value of board or lodging are:

  • If an employer provides free accommodation, board or lodging as part of an employee's entitlements, the value of the accommodation or board or lodging is NOT treated as income of the employee for social security purposes.
  • If a scholarship includes either free (or a reduced charge for) accommodation, the value of the free (or reduced charge for) accommodation is NOT income for social security purposes.

For the treatment of income from board and lodgings (i.e. in the hands of the provider), see 4.3.8.40.

Act reference: SSAct section 8(8)(za) the value of board or lodging …

Policy reference: SS Guide 4.3.3.60 Deferred Income, Salary Sacrifice, Valuable Consideration & Fringe Benefits

Value of emergency relief or like assistance, including natural disaster funds

The value of emergency relief or like assistance is exempt as income under SSAct section 8(8)(c). However, depending on how the money is used, it may be treated as an asset under the assets test and, if invested, may be deemed to earn income under the income test.

Examples of emergency relief or like assistance are:

  • state government financial assistance to victims of bushfires
  • Bali Emergency Relief
  • payment of Transition to Independent Living Allowance (TILA) to or on behalf of young people leaving state-supported care
  • drought financial assistance, and
  • flood financial assistance.

Note: This list is not exhaustive.

Payments from trust funds that pay out assistance to people suffering losses from natural disasters are one-time relief payments, and are NOT regarded as income for social security purposes.

Act reference: SSAct section 8(8)(c) the value of emergency relief …

Policy reference: SS Guide 4.4.1.30 Scope of Deeming, 1.1.T.145 Transition to Independent Living Allowance (TILA)

Treatment of compensation & insurance payments for buildings, plant or personal effects

If a person receives compensation or an insurance payment to repay debt (e.g. consumer credit insurance) or for damage to their buildings, plant or personal effects, that payment is NOT treated as income for social security purposes.

If the payment is for damage to buildings, plant or personal effects, and is held as a financial investment, the financial investment and any interest earned are NOT deemed under the income test for up to 12 months after the person receives the payment.

The exemption from the income test deeming rules MAY be extended past 12 months if the person can show that they meant to spend the compensation or insurance payment on repairs within 12 months, but that they were not able to do so for reasons beyond their control.

Exception: If the payment is not invested, but spent for another purpose, it may become immediately assessable under the income and assets tests.

Example: If the money is used to purchase motor vehicles, the value of the motor vehicles is assessed under the assets test.

Act reference: SSAct section 8(8)(k) insurance or compensation …, section 8(8)(ka) where: the person owes money …, section 8(8)(m) money from an investment …, section 1084(1) Certain money and financial investments not taken into account

Payments from medically acquired HIV trusts

Payments from the Mark Fitzpatrick Trust and the NSW Trust are a combination of lump sums and periodic payments and are NOT treated as income for social security purposes under the compensation and income test provisions.

Explanation:

  • The Mark Fitzpatrick Trust was established in 1989 by the Commonwealth Government to provide special financial assistance to people with medically acquired HIV infection and AIDS, their dependents and carers.
  • The NSW Government has established the NSW Medically Acquired HIV Trust to provide financial assistance packages for people with medically acquired HIV or AIDS in NSW. The Mark Fitzpatrick Trust acts as a payment agency on behalf of the NSW Medically Acquired HIV Trust.

Exception: The continuing assets and income tests treatment will be determined by how a person makes use of the funds. The funds may be used to obtain additional assets such as a car. For a purchase such as this the assets test would apply. Or, the funds may be placed in a financial investment. The funds have then become a financial asset (refer to SSAct section 9(1) for all the types of financial assets), assessable as an asset and subject to the income test deeming rules.

Act reference: SSAct section 8(8)(va) a payment made by the Mark Fitzpatrick Trust …, section 9(1) Financial assets and income streams definitions, section 1071 Seniors Health Card Taxable Income Test Calculator

Policy reference: SS Guide 4.4 Deeming Provisions

Private health insurance rebate

The Private Health Insurance Incentives Act 1998 provides for a 30% private health insurance rebate/benefit from 1 January 1999. This rebate/benefit is NOT income for social security purposes, as it is merely refunding money already assessed as part of gross income.

Blocked income

The term 'blocked' is used if a person has severely limited or no access to income. The treatment of blocked foreign income is dealt with by the Federal Court in Rose v Secretary, Department of Social Security (1990) 21 FCR 241. The Rose decision held that no territorial limitation could be implied into the definition of income. When access to a foreign pension is severely limited, for example, the paying country restricts payment of pensions overseas, or access is restricted to residents of or to people physically present in the paying country, does NOT mean the pension is considered 'blocked'.

Depending on the circumstances of the individual case, however, it MAY be accepted that a pension is NOT income for social security purposes, where the prospect of receiving the money is so remote that the monies are not 'earned, derived or received' for the person's own use or benefit.

Policy reference: SS Guide 4.3.6.10 Income from Overseas Payments - General Rules, 4.3.9.70 Income from Private Annuities & Overseas Income Streams

Payments exempted under international agreements

International agreements contain income-testing concessions on certain types of payments made by the agreement partners.

Policy reference: SS Guide 4.3.6.11 Income from Overseas Payments - Specific Payments

NEIS payments

NEIS payments are not treated as ordinary income. However, they are direct deductions for MOST payments. Refer to the Act reference for further information.

Explanation: NEIS is funded by the Commonwealth.

Act reference: SSAct section 1186 General effect of Part, section 1187 Reduction in rate of payments …, section 1188 Rate reduction under this Part

Policy reference: SS Guide 1.1.N.50 New Enterprise Incentive Scheme (NEIS), 4.3.3.80 Income from New Enterprise Incentive Scheme (NEIS)

NDIS amounts & returns on NDIS amounts

NDIS amounts (1.1.N.03), received by an NDIS participant (1.1.N.05) as part of the participant's NDIS plan (1.1.N.06), are exempt income for the NDIS participant.

Explanation: NDIS amounts are to provide care and support for people with disability and are not for the NDIS participant's income support.

The exemption of NDIS amounts under the income test only applies in the hands of the NDIS participant.

Example: If NDIS amounts are used to pay a person to provide care and/or support for the NDIS participant, the amount paid is treated as employment income (1.1.E.102) for the person providing the care and/or support.

Any actual returns that are earned, derived or received on NDIS amounts are also exempt income.

Example: NDIS participants who self-manage their NDIS amount in accordance with their NDIS plan may hold unspent NDIS amounts to pay for future disability expenses, and may earn interest on those amounts. This interest is also exempt from the income test.

A means test exemption applies to NDIS amounts in the hands of the NDIS participant:

NDIS participants are not required to notify the receipt of NDIS amounts, how NDIS amounts are spent, or about accounts holding only NDIS amounts (3.1.3).

Act reference: SSAct section 23(1)-'NDIS amount', section 23(1)-'NDIS participant', section 23(1)-'NDIS plan', section 8(8)(jag) an NDIS amount, section 8(8)(jah) any return on a person's NDIS

Exempt funeral investments (funeral bonds)

An 'exempt funeral investment' is usually called a funeral bond (4.6.2.10). Interest paid on an exempt funeral investment is NOT income. IF an investment in a funeral bond is NOT an exempt funeral investment then it is assessed as an asset and deemed.

Example: A person invests $14,000 in a funeral bond. The asset value is $14,000 and it is deemed.

Act reference: SSAct section 8(8)(ma) money from an exempt funeral investment, section 19E Exempt funeral investments

Policy reference: SS Guide 4.6.2.10 General provisions for exempt assets

Rental income from former principal home for aged care residents

Rental income that a person receives while living in an aged care residence may be exempt from the income test in certain circumstances.

If the person is residing in the care situation (1.1.C.25) and entered the care situation before 1 January 2017, AND

  • an accommodation charge (1.1.A.18) is payable, OR
  • a daily accommodation payment/daily accommodation contribution (1.1.D.05) is payable, OR
  • they are paying some or all of an accommodation bond (1.1.A.15) by periodic instalments,

then any rent received from the former home is exempted from the income test.

Note: For the purposes of the rental income exemption, a person is still considered to have entered aged care before 1 January 2017 following absences from aged care of up to 28 days. There is no time limit if the person is on leave from aged care.

If, after 1 January 2017, a person re-enters aged care after having been absent for more than 28 days (other than being on leave) they will not be able to access the rental income exemption.

Act reference: SSAct section 8(8)(zn) while a person is accruing …, section 8(8)(zna) while a person is liable …, section 8(8)(znaa) while a person is liable …

Policy reference: SS Guide 4.3.8.40 Income from Boarders or Lodgers

Treatment of Australian Defence Force Reserve payments

Defence Force reservists can perform Reserve Training, Reserve Service or, on some occasions, Continuous Full-time Service Reserve Service (1.1.C.335).

Under the provisions of SSAct section 8(8)(w), income from Reserve Service (including Reserve Training) is exempt from the income test. However, income earned during Continuous Full-time Service is not exempt and assessable under the income test.

Act reference: SSAct section 8(8)(w) in the case of a member …

Policy reference: SS Guide 3.2.9.140 Suitable Activity - Defence Force Reserves, 4.13.1.25 Treatment of Specific Compensatory Type Payments

Exempt lump sums

Some lump sums are NOT treated as income for social security purposes.

They include items like:

  • one-off gifts, irrespective of the source of the gifts, if they are not of a periodical nature or representing a form of continuous support
  • windfall gains such as lottery winnings, or the distribution of capital from a legacy or inheritance.

Note: For the treatment of a lump sum withdrawal from a superannuation fund (see 4.8.2.30). For the treatment of a lump sum commutation from an income stream (see 4.9.1.10).

The transfer of an income stream to a reversionary beneficiary is located in 4.9.1.20.

Exception: Periodical lottery winnings that are a series of payments under one contract - each instalment is assessed as income over the period it represents. For example, each instalment of $50,000 paid once a year would be held as income over 12 months.

Example: For lottery winnings received in annual instalments of $50,000 per year for 20 years, each instalment is assessed as income over 12 months.

Further references to exempt lump sums can be located in 4.3.2.31 Income Exempt from Assessment - Specifically Approved, and 4.3.2.35 Income exempt from assessment - s 8(11) exempt lump sums.

Note: The initial exemption of a lump sum amount from the income test does NOT alter the fact that any on-going income generated by the lump sum is counted under the income test, and any assessable asset produced from the lump sum is counted under the social security assets test. Once the lump sum amount is invested or used to purchase goods or services, the usual income and assets rules will apply. For example, if the lump sum amount is used to buy a car, the car would be counted as an asset under the assets test. If the lump sum amount is spent on a holiday or on bills there would generally be no ongoing income or asset to be assessed. If the lump sum amount is placed in a financial investment (such as a bank account) the funds have then become a financial asset that would be assessable as an asset and subject to the income test deeming rules (refer to SSAct section 9(1) for all the types of financial assets).

Act reference: SSAct section 8(8) Excluded amounts-general, section 8(11) An amount received by a person is an exempt lump sum …, section 9(1) Financial assets and income streams definitions

Policy reference: SS Guide 4.4.1.30 Scope of Deeming, 4.9.1.20 General Provisions for Assessing Income Streams

Other exempt income

The following are NOT treated as income for social security purposes:

  • payments to victims of National Socialist persecution (restitution) and German pensions with deemed periods of contribution
  • payments made to a person for, or in respect of, their dependent child/ren (1.1.D.70)
  • a payment made under the law of the Commonwealth or by a State or Territory to assist a person to build or purchase their own home, such as the first home buyers grant
  • money passing between partners in a couple in the form of housekeeping or personal allowance
  • payments of an APPROVED scholarship awarded on or after 1 September 1990
  • legacies or inheritance
  • any return on a person's investment in a First Home Saver Account
  • a payment made by the Commonwealth, under the program established by the Commonwealth and known as 'Youth Jobs PaTH', to an individual placed in an internship under that program, and
  • certain payments from DVA.

Exception: Spousal maintenance is not ordinary income (1.1.O.30) but is included as income for some purposes.

Example: For family payment purposes.

Act reference: SSAct section 8(8) Excluded amounts-general, section 9(1) Financial assets and income streams definitions

Policy reference: SS Guide 4.3.9.50 Income from Gifts, Legacies, Royalties & Native Title Claims, 4.3.9.40 Income from scholarships, 4.3.6.30 Holocaust Restitution Payments - All Countries, 4.3.4.30 Description: employment termination payments (ETPs) & roll-overs for the IMP, 4.2.1.20 Additional Free Area for Dependent Children

Exempt items for PP

The usual rules about exempt income also apply to PP, although some issues are particularly common for PP recipients. The following types of income are EXEMPT for PP purposes:

  • money passing between partners in a couple in the form of housekeeping or personal allowances, and
  • spousal maintenance and maintenance payments for children.

Explanation: PP is a payment for the carer not the child, and no maintenance action is necessary to qualify for PP. For information on the maintenance action test for FTB recipients, refer to FA Guide 3.1.5.

Western Australian Government Cost of Living Rebate Scheme & Country Age Pension Fuel Card

The following are not counted as income for social security purposes:

  • the Western Australian Government Cost of Living Rebate Scheme payments, and
  • benefits obtained by using the Western Australian Country Age Pension Fuel Card.

Act reference: SSAct section 8(8)(zaa) an amount received under the scheme known as the Western Australian Cost of Living Rebate Scheme, section 8(8)(zab) the value of a benefit obtained by using a card known as the Western Australian Country Age Pension Fuel Card

PPL

PLP and DAPP are counted as income for social security purposes where the payment is in respect of a child who was born on or after 1 October 2016 or a child who became entrusted to the care of the person on or after 1 October 2016.

Act reference: SSAct section 8(1)-'income amount', section 1072 General meaning of ordinary income

Policy reference: PPL Guide 1.2.2 Impact of PLP & DAPP on Other Entitlements

Seasonal work living away & travel allowance

The seasonal work living away and travel allowance is not counted as income for social security purposes.

Note: A seasonal work living away and travel allowance of up to $300 a year is available from 1 July 2017 to NSA and YA (Other) recipients who participate in the 2 year Seasonal Horticultural Work program trial. Trial participants may be eligible for the payment if they undertake horticultural seasonal work more than 120km from their home. The payment is made by employment services providers, including jobactive, Transition to Work and DES.

Act reference: SSAct section 8(8)(sa) a payment … seasonal work living away and travel allowance

Seasonal horticultural work income exemption

The seasonal horticultural work income exemption is part the Seasonal Horticultural Work program. The program will operate as a 2 year trial from 1 July 2017.

Under the seasonal horticultural work income exemption, the first $5,000 earned by participants in the trial from qualifying seasonal horticultural work in the 12 months after they join the trial is not counted as income for social security purposes. More information is at 4.3.3.90.

Act reference: SSAct Part 3.10 Division 1AC Seasonal horticultural work income exemption

Policy reference: SS Guide 4.3.3.90 Seasonal Horticultural Work Income Exemption

Payments from the National Redress Scheme for Institutional Child Sexual Abuse

Payments under the National Redress Scheme for Institutional Child Sexual Abuse Act 2018 are not counted as income for social security purposes under the SSAct section 8(8)(jc).

Note: The initial exemption of these payments from the income test on receipt does not alter the fact that any ongoing income generated by the lump sum is counted under the income test, and any assessable asset produced from the lump sum is counted under the social security assets test.

Act reference: SSAct section 8(8)(jc) a payment under the National Redress Scheme for Institutional Child Sexual Abuse Act 2018

Last reviewed: 1 July 2019