4.3.3.25 Employment income for pensioners of age pension age from 20/09/2009

Summary

From 20 September 2009, provisions in the social security legislation were changed so that employment income for people in receipt of social security pensions and who are of age pension age are treated on the same basis as people who are under age pension age.

This topic provides information about:

  • employment income for pensioners
  • assessment of employment income paid monthly for pensioners
  • assessment of employment income for pensioners over age pension age
  • income from independent contracting, and
  • treatment of leave payments - not engaged in a continuing employer/employee relationship or engaged in a continuing employer/employee relationship.

Employment income for pensioners

Employment income for pensioners is treated as income for social security purposes.

Act reference: SSAct section 8(1) Income test definitions, section 8(1A) A reference in this Act to employment income, in relation to a person …, section 8(1B) For the avoidance of doubt, if …, section 8(1C) For the purposes of subsection (1A), a leave payment …

Policy reference: SS Guide 4.3.1.20 Determining the rate of income for pensioners of age pension age from 20/09/2009, 1.1.E.102 Employment income

Assessment of employment income paid monthly for pensioners

Employment income (1.1.E.102) is usually assessed forward from the start of the entitlement period (1.1.E.125) in which the amount is paid, for the same number of days as the period for which it is paid. There is an exception to this for pensioners paid calendar monthly. A person receiving a social security pension, who is paid employment income monthly, on the same date every month (such as a salary earner paid on the 15th of every month) and the Secretary is satisfied that this will continue for the foreseeable future (same pay, paid monthly on the same date every month) will have their employment income averaged out across an entire year. This means the person's employment income will, for the day the person is first paid and each after that, will be taken as the initial monthly amount multiplied by 12 and divided by 364.

Where the Secretary is no longer satisfied that the person will continue to be paid the same pay, monthly, on the same date every month, the yearly averaging will cease to apply at the end of one month beginning on the last day that the employment income is paid under those arrangements.

Example: Rodger is an age pension recipient and is paid $1,000 by his employer on the 10th of each month. Rodger demonstrates to Centrelink that he will continue to be paid in this way for the foreseeable future by providing Centrelink with a copy of his contract of employment that sets out the arrangement. Rodger's employment income commences being assessed on an ongoing basis, resulting in a consistent level of income support each fortnight.

Assessment of employment income for pensioners over age pension age from 20/09/2009

Persons over age pension age receiving a social security pension have their employment income assessed from the beginning of the instalment period in which it is paid and attributed forward for the relevant number of days. Because a pension rate is calculated as an annual rate, the fortnightly rate of employment income is converted to an annual rate for input to the rate calculation process.

If there is access to the work bonus the rate of ordinary income will be adjusted.

Act reference: SSAct section 1073AA Work bonus, section 1073A Attribution of employment income paid in respect of a particular period or periods, section 1073B Attribution of employment income paid monthly

Policy reference: SS Guide 3.1.15 Work bonus

Income from independent contracting

A contract of service or labour indicates an employer/employee relationship. A contract for services to produce a result indicates self-employment.

Pensioners over age pension age (apart from PPS) who have self-employment income from gainful work may be eligible for the work bonus from 1 July 2019.

Persons over age pension age receiving a social security pension have their assessed annual income from self-employment from gainful work converted to income for an instalment period. The self-employment income from gainful work for an instalment period is spread evenly across all days in the instalment period, regardless of which days, or the number of days, worked.

Act reference: SSAct section 1073AA(4BB) to section 1073AA(5A) Work bonus

Policy reference: SS Guide 4.3.3.20 Income from employment or independent contracting, 3.1.15 Work bonus, 3.1.15.20 Work bonus - overview

Treatment of leave payments - not engaged in a continuing employer/employee relationship

Leave payments paid on cessation of employment are not assessed as income for pensioners of age pension age. The exception to this are those pensioners of age pension age, in receipt of either PPS or DSP, who will have their leave payments treated as income for the length of time those entitlements represent (1.1.I.60) under the IMP provisions.

Explanation: Those in receipt of PPS or DSP are not exempt from the IMP provisions, even though they are of age pension age.

Employment not terminated

If a pensioner receives paid leave as part of a continuing employer/employee relationship, the amount received is assessed as employment income under the normal income test. Generally, the period covered by a lump sum payment will be allocated from the beginning of the instalment period in which it is paid and apportioned forward, for up to 52 weeks, for the number of days for which the lump sum was paid.

The exception to this will be where a pensioner is paid employment income calendar monthly (same pay, paid monthly on the same date every month). Employment income whether for a period worked, or leave taken, will continue to be assessed by being averaged across the year.

Example: A pensioner takes 8 weeks long service leave paid as a lump sum in advance. The first 4 weeks are at full pay and the second 4 weeks are at half pay. The advance lump sum in the first 2 fortnights is treated as employment income at the full pay rate with the second 2 fortnights assessed at the half pay rate.

Explanation: The leave payments may be received on a periodic basis or as a lump sum. In either case, the payments are apportioned forward from the beginning of the instalment period in which they are paid. The paid leave may be:

  • personal leave pay
  • long service leave pay
  • holiday leave, or
  • annual leave.

Example: A pensioner, paid a salary calendar monthly takes 3 weeks annual leave this continues to be paid as part of the regular monthly salary (3 weeks as leave and the remaining days as usual hours). This continues to be assessed under the calendar monthly provision by being averaged across the year.

Act reference: SSAct section 8(1) Income test definitions, section 8(1A) A reference in this Act to employment income, in relation to a person …, section 8(1B) For the avoidance of doubt, if …, section 8(1C) For the purposes of subsection (1A), a leave payment …, section 1073A Attribution of employment income paid in respect of a particular period or periods 1073B Attribution of employment income paid monthly, section 1073C Fortnightly or yearly expression of attributed employment income

Last reviewed: 7 December 2020