4.3.3.30 Employment Income for Pensioners of Age Pension Age pre-20/09/2009

Summary

This topic provides information about:

  • employment income for pensioners,
  • 'one-off' employment income,
  • annual income assessment,
  • variable income,
  • determine an annual rate of income - short breaks in earnings,
  • determine an annual rate of income - one-off income amounts for one to several days,
  • determine an annual rate of income - total amount MAY equal annual rate,
  • income from independent contracting,
  • employment termination or significant break in earnings, and
  • employment not terminated.

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…, section 8(1C) For the purposes of subsection (1A), a leave payment…, section 1073A(1) Employment income…, section 1073A(2) The person's employment income…

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

'One-off' employment income

Generally, amounts of one-off earned income received are not taken into account UNLESS they are part of a pattern.

One-off earnings are not limited to income from employment for one day. The employment may last several days, but must have the characteristics of 'one-off' or never likely to be repeated. Sometimes this evaluation can only be made in hindsight.

Policy reference: SS Guide 4.3.1.20 Determining the rate of income for pensioners of age pension age from 20/09/2009

Annual income assessment

If earnings are at a regular constant rate, the current rate whether weekly, fortnightly or monthly, is converted to an annual figure.

Variable income

If income is not earned at a constant or clearly recognisable rate, average earnings over a suitable period may be used to obtain a rate. If there is difficulty in deciding what period to average earnings over, the guiding principle is that the calculation should provide a reasonable reflection of the current rate of income. Generally an average of the previous 13 weeks earnings provides an acceptable figure if the pattern of earnings is likely to continue. However, less than 13 weeks average MAY be more appropriate if the shorter period better reflects the pattern of earnings.

Determine an annual rate of income - short breaks in earnings

If a delegate is satisfied that employment is continuing but there are short breaks in earnings, it is acceptable to average the earnings over the period, including breaks. A short break should generally be considered as 6 weeks or less.

Determine an annual rate of income - one-off income amounts for one to several days

Generally, amounts of one-off income received are not taken into account UNLESS they are part of a pattern of income. This income should be recorded so that any pattern of one-off payments can be established. Income such as earnings can be considered as one-off income if they are not likely to be repeated in the short to medium term and the person does not have a history of income from the source.

One-off earnings are not limited to income from employment for one day. The employment may last several days, but must have the characteristics of one-off or never likely to be repeated. Sometimes this evaluation can only be made in hindsight. If it is established that a pattern of employment exists, income from that employment should be assessed to determine an annual rate of income.

Explanation: In the High Court case of HARRIS v Director-General of Social Security (1985) 57 ALR 729 it was decided that if a source of income no longer exists, the income from that source will not affect the current rate of pension (the 'Harris principle').

Example: One-off earnings would include a person working for the Royal Easter Show for 3 consecutive days, once a year, every year. Even though employment occurs every 12 months, which in itself is a pattern, it is too irregular to constitute ongoing income.

Determine an annual rate of income - total amount MAY equal annual rate

Where employment is isolated in nature, discrete, short term for a closed period (even if repeated), an age pensioner's total earnings from employment MAY be treated as the annual rate (rather than setting an annual rate based on earnings per fortnight (pf) × 26). For example, an age pensioner with earnings of $300 a week for 4 weeks would be taken to have annual income of $1,200. Such a situation would be the exception when determining an annual rate of income.

The method that most accurately reflects an age pensioner's current income should be used. Where more than one method may be appropriate, the most beneficial treatment should be used.

In all other circumstances, PREFERENCE is to annualise the income for the period of employment to determine an annual rate of income.

Before making a decision, Centrelink delegates should take into account:

  • any recent history of past employment, AND
  • the likelihood of future paid employment, AND
  • any unusual circumstances surrounding the employment, AND
    • Example: Relieving a sick relative or friend that may be evidence of the isolated nature of the employment.
  • whether the employment is isolated short term in nature.
    • Example: Usually every year the age pensioner works as an exam supervisor for 2 weeks and has no other similar or related earnings for the year.

Earnings from other completely different types of employment does not jeopardise an age pensioner's earnings from an isolated short term employment to be considered as the annual rate.

Example: Completely different types of employment such as earnings as exam supervisor compared to irregular income as a self-employed doll maker.

Sometimes, the facts of the person's circumstances become clearer with the benefit of hindsight (e.g. when deciding if the person has been overpaid).

Explanation: In the Federal Court case of Secretary, Family and Community Services v Rolley [2000] FCA 806 (20 June 2000), the Court found that it was lawful for the AAT to decide that although pension entitlement should be calculated with reference to an annual rate, the amount earned MAY be taken to be the annual rate. In the decision the Court was satisfied that income from relief cleaning was earned for a closed period, there was no expectation of the work continuing and there was no work before or since.

Proper regard to the nature of the income must be taken into account, with the circumstances of each case being considered, sometimes in hindsight, to determine whether an annual rate is set ($X pf × 26) OR whether the annual rate can be taken to be the total amount earned (i.e. after all information is assessed and with the benefit of hindsight). The Federal Court found that either method is lawful and whichever method is more applicable to the individual circumstances of each person should be used. The appropriate method should provide the best result for a person (taking into account the preferred treatment of annualising income). Generally, average earnings over a suitable period are used to obtain a rate of income unless it is clear a person's circumstances are such that the exceptional treatment of the annual rate being the total amount earned is more appropriate.

Exception: This treatment does NOT apply to PP paid to partnered persons.

Policy reference: SS Guide 4.3.1.20 Determining the rate of income for pensioners of age pension age from 20/09/2009, 4.3.1.40 Determining the Rate of Income for PP, 5.1.4.30 Calculating a rate of PP - partnered

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.

Policy reference: SS Guide 4.3.3.20 Income from employment or independent contracting

Employment termination or significant breaks in earnings

When employment terminates or if there are significant breaks in earnings, earnings are NOT assessed as income.

Example: An example of a significant break in earnings is leave without pay.

Treatment of leave payments - Employment terminated or significant break in earnings

Leave payments paid on termination of employment either as a lump sum or in instalments (some employers may not have the capacity to pay accrued leave in a lump sum) are not assessed as ongoing income for pensioners of age pension age for the period covered by the payment. 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).

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, the money received IS assessed as income under the normal income test.

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:

  • sick leave pay,
  • long service leave pay,
  • holiday leave, or
  • annual leave.
Last reviewed: 3 July 2017