188.8.131.52 Employment income for pensioners of age pension age from 20/09/2009
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 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 …
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 (1.1.E.102) assessed in the instalment period in which it is earned, derived or received. The fortnightly amount of employment income is spread evenly across all days in the instalment period, regardless of which days or the number of days worked. 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.
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
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 (see 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. The period covered by a lump sum payment will be allocated to appropriate instalment periods and spread evenly throughout the instalment periods.
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 over the period represented by the leave payments and the income test is applied. The paid leave may be:
- personal leave pay
- long service leave pay
- holiday leave, or
- annual leave.
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 Employment income attribution over …, section 1073B Daily attribution of employment income, section 1073C Fortnightly or yearly expression of attributed employment income