220.127.116.11 Application of the income maintenance period (IMP)
This topic describes the following issues to do with the application of the IMP:
- who is affected by the IMP
- effect of the IMP
- exemption from the IMP for JSP and YA recipients due to death of the person's partner
- calculating the length of the IMP
- date of commencement of the IMP when employment has ceased
- income from FEG
- date of commencement of the IMP when a leave of absence is taken although employment is continuing
- effect of the IMP on couples and its method of assessment, and
- effect of working credit on the IMP.
Payments affected by the IMP
The IMP applies to both claimants and recipients of the payments in the following table. The table also shows the SSAct sections relating to the IMP for each payment.
|Payment||Relevant sections of the SSAct|
|section 1068-G7AG to section 1068-G7AR|
|Parenting payment (single)||section 1068A-E3 to section 1068A-E12|
|Parenting payment (partnered)||section 1068B-D9 to section 1068B-D18|
|Youth allowance||section 1067G-H4 to section 1067G-H20|
|Austudy payment||section 1067L-D2 to section 1067L-D16|
|Disability support pension||section 1064-F1 to section 1064-F14
section 1066A-G1 to section 1066A-G14
When an IMP is applied
The IMP is the period of time in which people who have received termination or leave payments have these amounts treated as ordinary income. An IMP applies where a person:
- is in continuing employment but is on leave and is entitled to receive a leave payment (18.104.22.168)
- has had their employment terminated and receives a termination payment (see below).
Explanation: People and their partners (1.1.P.85) are expected to use leave and termination payments to support themselves before being paid a benefit.
Note: Termination or leave payments from any form of employment may be assessable under the IMP. This includes open employment and supported employment including employment within an Australian Disability Enterprise (ADE), the supported wage system or another program of support.
Exemption from the IMP for JSP & YA claimants
An IMP may not apply if a person is making a claim for JSP or YA within 14 weeks of their partner's death, or if the person was pregnant when their partner died, within 14 weeks of their partner's death or before the pregnancy ends, whichever is the longest period. An IMP is not applied in relation to any leave or termination payments paid during the 14-week (or longer if applicable) bereavement period for these claimants.
Act reference: SSAct section 1067G-H12A Exception to points 1067G-H11 and 1067G-H12 (YA), section 1068-G7AI Exception to points 1068-G7AG and 1068-G7AH (JSP)
For the purposes of the IMP, a termination payment means:
- a leave payment relating to the person's employment that has been terminated
- a redundancy payment, including a payment in lieu of notice, and
- any other payment that is connected with the termination of the person's employment.
Example: Termination payments for the IMP include (but are not limited to):
- payments in respect of untaken long service leave, annual leave, sick leave and other types of personal leave
- payments in respect of untaken maternity/paternity leave (except parental leave payments made under the PPLAct)
- payments made under contracts for early termination of employment
- gratuity payments (such as a 'golden handshake' or 'farewell gift', which may be payable in addition to a person's contract or award entitlements)
- payments in lieu of notice
- payments made under FEG (see below).
Note: Only redundancy payments received in respect of a person's employment being terminated on or after 20 September 2006 are included in the IMP. Redundancy payments received before this date are disregarded.
Payments from FEG
FEG provides protection for unpaid employee entitlements when people lose their job due to liquidation or bankruptcy of their former employer.
Payments made under FEG which represent termination entitlements that would otherwise have been received from the person's employer are treated as termination payments for the IMP.
Example: Unpaid employee entitlements that may be paid under FEG include unpaid annual leave, long service leave, payment in lieu of notice and redundancy pay.
Policy reference: SS Guide 22.214.171.124 Income from Fair Entitlements Guarantee (FEG)
Verifying termination payments for the IMP
Generally when a person ceases employment, the employer provides the person with an employment separation certificate. This certificate will usually provide details of the person's leave entitlements, redundancy payment, any other termination payments, regular weekly wage, superannuation etc. If the employment separation certificate does not define the payment or the regular weekly wage the employer should be contacted to verify amounts.
To verify whether a payment is a payment in lieu of notice, a copy of the relevant industrial instrument covering the person's employment (e.g. a modern award, enterprise agreement or common law contract) should be obtained. A payment in lieu of notice will usually be calculated under the relevant industrial instrument by reference to a formula that is customarily dependent on the number of years of service of the person. For example, a person may be entitled to 2 weeks payment in lieu of notice for every year of service.
Effect of the IMP
Under the IMP, where employment has ceased, any termination payments received by a person or their partner are treated as ordinary income and apportioned evenly across the period covered by the IMP. Where employment is continuing, any leave payments received by a person or their partner are treated as ordinary income and apportioned evenly across the leave period for which the payment was made. This income is then assessed under the relevant income test to determine the person's rate of payment.
For new claimants of an IMP affected payment, this generally results in the person's rate of payment being nil or the person receiving a reduced rate of payment for the period covered by the IMP.
In some circumstances, for example, where the person is already receiving an IMP affected payment, the application of the IMP may result in the continuation of their usual rate of payment. This may occur where the person has been in receipt of a part rate of income support while working and receives a termination or leave payment that is equivalent to the rate of income they were receiving from their employment.
Calculating the length of the IMP
The following table sets out how to calculate the length of the IMP depending on the person's employment situation.
|If a person's employment …||then …|
the length of the IMP is calculated by adding together:
|is continuing||the actual leave period is used instead, as lump sum or periodic leave payments will relate to a definite period.|
Note: An IMP is calculated using gross amounts of payments not net amounts; that is the total gross leave or termination payment and, where relevant, the person's gross relevant weekly wage.
Example 1: Lisa has claimed PPP and supplied an employment separation certificate for which there were no days of recreation leave supplied but leave payments of $3,690 have been made. On contacting the employer, he advised that the leave payments represent 23 days of recreation leave. Lisa's IMP period is therefore 23 days. This means that the leave payments of $3,690 will be apportioned evenly over the 23 day IMP period and assessed as ordinary income under the PPP income test.
Example 2: Michael has been made redundant from a company and on the day of leaving he receives a redundancy payment consisting of:
- 5 weeks annual leave
- 10.5 weeks long service leave
- $25,500 gratuity payment (also known as a 'golden handshake'), and
- 4 weeks payment in lieu of notice.
Michael's IMP will be calculated as follows:
- 5 weeks annual leave = 5 weeks IMP
- 10.5 weeks long service leave = 10.5 weeks IMP
- $25,500/$1,000 (Michael's gross weekly income) = 25.5 weeks rounded down to 25 weeks IMP, and
- 4 weeks payment in lieu of notice = 4 weeks IMP.
The total IMP period will be 44.5 weeks. Michael's total redundancy payment will be apportioned as ordinary income over this 44.5 week period and assessed under the applicable income test.
Example 3: Gerry is made redundant and receives a lump sum redundancy payment of $32,000. The amount of $32,000 consists of:
- leave payments representing 4 weeks annual leave, and
- payment of 3 weeks for every year of service.
Advice from Gerry's former employer is that payment of 3 weeks wages for every year of service is the equivalent of 26.67 weeks. This is rounded down to 26.60 weeks (26 weeks and 3 days when using a 10 day working fortnight) and added to the period of time that the leave payments represent in order to find the full length of the IMP. Gerry's total IMP period is therefore 30.6 weeks (or 30 weeks and 3 days). Gerry's total redundancy payment will be apportioned over the 30.6 weeks and assessed as ordinary income under the relevant income test.
Example 4: Lawrence works for a food manufacturer and earns a basic wage of $1,000 a week for work during normal hours; however, Lawrence also works regular overtime and, as a result, he earns gross income of $1,500 per week for an extended period of 12 months. When Lawrence is made redundant from his job, he receives a lump sum payment of $15,000 which consists of:
- 4 weeks redundancy pay
- 2 weeks annual leave, and
- $7,000 gratuity payment.
Lawrence's IMP will be calculated as follows:
- 4 weeks redundancy pay = 4 weeks IMP
- 2 weeks annual leave = 2 weeks IMP
- $7,000/$1,500 (Lawrence's relevant weekly wage which includes overtime) = 4.7 weeks rounded down to 4 weeks IMP.
The total IMP period will be 10 weeks. During this 10 week IMP period, Lawrence's $15,000 lump sum payment will be treated as ordinary income and assessed under the relevant income test.
Assessment of employment termination payments
From 1 July 2012, employment termination payments can no longer be rolled-over into superannuation. Transitional arrangements applied to some employment termination payments made between 1 July 2007 and 30 June 2012. Under the transitional arrangements, employment termination payments that were rolled-over into superannuation funds were not assessed as termination payments and were not included in the calculation of the IMP (see 126.96.36.199 for further explanation).
Policy reference: SS Guide 188.8.131.52 Description: employment termination payments (ETPs) & roll-overs for the IMP
Date of commencement of the IMP when employment has ceased
As a general rule the IMP takes effect from the date the employer pays the termination payment/s. This is irrespective of whether the person has claimed income support.
Example: A person finishes employment and receives 14 weeks of leave and redundancy payments. They do not claim income support for a period of 11 weeks. Following the date of claim the person must serve the residual IMP period of 3 weeks only.
If an employer has not paid the termination payment/s due to the former employee (1.1.E.87) at the time the claim is assessed, the claim is assessed as if there were NO termination payments paid. The date of commencement and rate of payment are calculated without any consideration of an IMP. The IMP will commence when the termination payment is paid to the person.
However, if a person is subject to, and is serving, a LAWP and the person is also subject to an IMP, the IMP and the LAWP are served concurrently. This means that the commencement date for the IMP will be the day on which the LAWP starts, including where the termination payment is received after the LAWP has started.
Example 1: A person is serving a 13-week LAWP and on week 8 the person receives payment of 4 weeks leave. The IMP commences on the day the LAWP started and therefore the person has already served the 4 weeks IMP.
Example 2: A person is serving a 6-week LAWP and during the 5th week the person receives a redundancy payment that results in an IMP of 20 weeks. The person is already serving a 6-week LAWP and therefore the person's IMP will continue for a further 14 weeks after the LAWP ceases - the end result is the person will have concurrently served a 6-week LAWP and 20-week IMP.
If a person is paid another termination payment after an IMP has already been imposed then a second IMP must be calculated. The second IMP will commence from the day after the first IMP expires.
Act reference: SSAct section 1068-G7AKA Start of income maintenance period-employment terminated, section 1068-G7AKC Start of income maintenance period where liquid assets test waiting period applies
Date of commencement of the IMP when a leave of absence is taken although employment is continuing
If a person takes paid leave, it is assessed as employment income and the IMP starts from the beginning of the leave period to which the payment relates. The income of the IMP that falls in an instalment period is therefore apportioned across that period. Similarly, if a person takes 2 or more types of leave during a period, each leave payment is taken into account for the period to which it relates. Where a person is advising employment income each fortnight, the total of any wages and leave/s that apply to that fortnight can be advised as one amount.
Note: Leave and leave loading are for the same period so these are added together.
In some cases there may be a period of unpaid leave separating 2 or more paid leave periods. Each period of paid leave is assessed separately. Unlike the IMP arrangements for terminated employment, these leave payments are NOT joined together to produce a continuous IMP.
Act reference: SSAct section 1068-G7AG Certain leave payments taken to be ordinary income-employment continuing (WA, JSP (18 or over), SA (18 or over), PA, and MAA under Part 2.12B), section 1064-F4 Certain leave payments taken to be ordinary income-employment continuing (Age, DSP and CP (people who are not blind)), section 1066A-G4 Certain leave payments taken to be ordinary income-employment continuing (DSP (people under 21 who are not blind))
Treatment of cashed out leave entitlements
Where a person has their leave entitlements cashed out, continues with their current employment and does not take the associated leave period, the lump sum amount is not subject to an IMP. The lump sum amount should be assessed as employment income and where payment is NOT in respect of a period apportioned up to 52 weeks for pensions under section 1073A. For allowances the lump sum amount should be apportioned over 52 weeks.
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 1067G-H23A Claimant or recipient receives lump sum amount for remunerative work, section 1068-G7B Claimant or recipient receives lump sum amount for remunerative work, section 1068B-D19 Period over which ordinary income taken into account, section 1073A Employment income attribution over a period for social security pensioners
Effect of the IMP on couples where one is receiving an IMP affected payment & the other is receiving a payment not affected by the IMP
When working out the rate of the IMP affected income support payment, a lump sum leave payment and/or termination payment received by either member of the couple should be assessed under the IMP provisions. The IMP IS NOT applied when working out the rate of Age, CP or service pension regardless of which partner received the leave/termination payment.
Example: Following David's cessation of employment, David and his partner Sally apply for Age and PPP respectively. On his last day of employment, David received $3,000 representing 3 weeks of annual leave. David and Sally's payments are granted from the day following David's last day of work.
The assessment of the couple's income for the fortnight following cessation of employment is as follows:
- An IMP applies to Sally's PPP. The $3,000 leave payment is apportioned evenly as ordinary income over a 3 week IMP period. As David is a pensioner, this income (plus any other income of the couple) is halved and assessed under the income test to determine Sally's rate of PPP.
- No IMP applies to David's Age. The $3,000 leave payment is not assessed as income for David (see below).
Assessment of leave payments for pensions not affected by the IMP
Where an age pensioner retires from work and has leave (such as long service leave) paid out in a lump sum, the payment does not meet the definition of employment income as there is no continuing relationship with the employer. Consequently, section 1073A which covers lump sum employment income does not come into play and neither does section 1073 which covers non-remunerative lump sums (as the leave payment is remunerative by nature because it relates to employment). Therefore there would be no continuing income assessment for such lump sum leave payments.
Note: For DSP the IMP provisions still apply to such lump sum leave payments to require income to be spread over a relative period.
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 paragraph (1A) …, Part 3.10 Division1AA-Employment income attribution rules, section 1073A Employment income attribution over a period for social security pensioners, section 1073B Daily attribution of employment income, section 1073C Fortnightly or yearly expression of attributed employment income
Depletion of working credits during the IMP
Termination payments, including leave payments relating to employment that has ceased, are not employment income, so working credits generally cannot be depleted during an IMP applied in respect of these termination payments.
Example: If a recipient returns to payment after a break of less than 12 months and has an opening working credit balance of more than zero, the working credits will not offset the income apportioned under the IMP to reduce the amount of income assessed under the income test.
In cases where the income assessed under the IMP does not fully preclude payment (i.e. recipient receives a part rate) and the recipient also has employment income then working credits will be used to offset the employment income.
Note: Leave payments paid where employment is continuing are employment income and therefore any available working credits or work bonus credits may be depleted for these leave payments.
Accrual of working credits during the IMP
Although termination payments are not employment income they are still ordinary income and could affect the accrual of working credits. To accrue working credits during an IMP, the person's income from their termination payment/s, plus other income the person has, would have to be less than $48 in an entitlement period.
Policy reference: SS Guide 184.108.40.206 Working Credit Accrual