4.3.6.11 Income from Overseas Payments - Specific Payments

Summary

This topic provides information about the following:

  • Chilean Pensions of Mercy (Pensiones de Gracia),
  • Italian supplement and other exempt payments,
  • UK retirement pension or widow's benefit international agreements (residency less than 10 years),
  • UK retirement pension or widow's benefit after 10 years residence,
  • British family allowance,
  • UK allowances,
  • UK Bereavement Payment,
  • UK Council Tax Benefit, and
  • USA pensions.

Chilean Pensions of Mercy (Pensiones de Gracia)

Chilean Pensions of Mercy (Pensiones de Gracia) were established under Chilean law to compensate and repair the moral suffering of victims and relatives of victims of human rights abuse or political violence that occurred in Chile between 11 September 1973 and 10 March 1990. Monthly payments made under Chilean Law Number 19.123 (Mercy Payments) and Chilean Law Number 19.234 (Periodic Mercy Payments) are exempt from the income test applied to all payments under the social security laws of Australia.

Act reference: SS(IntAgree)Act Schedule 15 Chile

Policy reference: SS Guide 10.16 Agreement with Chile

Italian supplement & other exempt payments

Italian law guarantees a minimum rate of pension. If a recipient has not made sufficient contributions to produce a contributory rate equal to the guaranteed minimum rate of Italian pension, Italy will make an extra payment to bring the actual rate to the minimum rate. This extra payment is known as the supplement or the 'integrazione al minimo', and is disregarded from the Australian income tests in certain situations, as described in 10.4.8.60.

Certain other amounts are also excluded from the income test, including the 'Importo Differenziale ex L335/95'. Although these amounts are excluded from the income test, they are included as part of the direct deduction amount if the person is receiving Australian pension by virtue of the agreement with Italy, and the person is in Australia.

Policy reference: SS Guide 10.4.8.60 Exempt Payments - Agreement with Italy

UK retirement pension or widow's benefit international agreements (residency less than 10 years)

Where people are eligible for an Australian pension by virtue of the UK-Australian Reciprocal Social Security Agreement and the person has less than 10 years residency, any British retirement pension a person receives from the UK reduces the rate of Australian pension on a dollar for dollar basis.

The UK-Australia Reciprocal Social Security Agreement was terminated from 1 March 2001. Termination of the agreement will not affect those receiving pensions from the UK in Australia, or those who may claim these in the future, as these are not granted under the agreement but are granted under UK domestic legislation.

Policy reference: SS Guide 10.3 Agreement with the United Kingdom

UK retirement pension or widow's benefit after 10 years residence

After 10 years Australian residence, a person from the UK qualifies for an autonomous Australian pension. The UK pension then ceases to be treated as a direct deduction and is assessed as normal income in working out the Australian pension rate.

British family allowance

The British family allowance is a payment for or in respect of a child and is not income. However, if Australian FTB is also paid it reduces the additional free area for dependent children (1.1.D.70). Information about the Budget 2009-10 changes to the additional free area for dependent children can be found in 4.2.1.20.

UK allowances

The following payments from the UK Government are NOT treated as income for social security purposes:

  • attendance allowance, and
  • disability living allowance.

UK housing benefit IS assessed as income for social security purposes. This applies in situations where the recipient receives the payment directly or when it is directed to the housing provider, even if paid as a direct subsidy over which the recipient has no control, such as to a council provider. When it is directed to the provider, it is considered to be 'valuable consideration' and treated as income.

Explanation: UK housing benefit can be paid in cash, paid to a private landlord at the recipient's direction or paid as a subsidy for council housing. All types of payment are income.

Information about changes to the pension income test in the Budget 2009-10 can be found in 4.2.1.10.

Act reference: SSAct section 8(1)-'income amount', section 35A Personal Care Support, section 8(8) Excluded amounts - general, see (ze)

Policy reference: SS Guide 1.1.V.25 Valuable consideration, 4.3.2.31 Income Exempt from Assessment - Specifically Approved, 4.3.3.60 Deferred Income, Salary Sacrifice, Valuable Consideration & Fringe Benefits

UK Bereavement Payment

In April 2001, the UK Government introduced a new system of bereavement benefits for men and women. The new Bereavement Payment replaced the old widows allowance. The new system however did not affect women who were already getting benefits under the previous scheme (as long as they continued to qualify under the rules).

The Bereavement Payment is a one-off payment of £2,000.00 and eligibility is based on the applicant's late partner's National Insurance (NI) contributions.

Eligibility for the UK Bereavement Payment is based on the applicant's deceased spouse having contributed a sufficient amount to the UK's National Insurance Contribution. The Bereavement Payment is a welfare payment, despite the fact it is paid as a lump sum instead of periodically. It is therefore assessed as a non-remunerative lump sum and apportioned over 52 weeks.

Act reference: SSAct section 1073 Certain amounts taken to be received over 12 months

Policy reference: SS Guide 4.3.1.10 Determining the Rate of Income for Benefits, 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

UK Council Tax Benefit

UK Council Tax Benefit is NOT considered income for social security purposes.

UK Council Tax Benefit effectively operates to reduce a person's Council Tax Benefit liability rather than being paid as an income amount. The value of the Council Tax Benefit cannot be paid out in the form of cash. The Council Tax Benefit is analogous to pensioner discounts that people can receive in Australia off their rates.

Further advice about the UK Council Tax Benefit is available at: Help with your rent - Housing Benefit.

USA pensions

The gross amount of USA pensions, whether government or privately funded, is assessed as ordinary income (1.1.O.30) and needs to be reviewed annually to update their rates.

Explanation: In the AAT decision in Durant (1999) the tribunal found that primacy must be given to the word 'gross' in SSAct section 1072 which makes clear the intention of the Act. This was reaffirmed in the decision in Cremer (2001). In Cremer the tribunal found a person may well accrue no direct benefits from their overseas taxation liability. Equally, a person in Australia accrues no direct benefits from payment of their Australian taxation liability; an individual's entitlements to services and facilities is not dependent on whether or not they pay taxes. It is clear that a detriment will ensue if a person has a taxation liability and does not pay it. It is to a person's benefit that his or her taxation liability be paid.

Act reference: SSAct section 1072 General meaning of ordinary income

Last reviewed: 21 September 2015