The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

3.1.12 Employment income nil rate period

Introduction

This topic covers:

  • summary
  • qualification rules for an employment income nil rate period
  • partner's income and the employment income nil rate period
  • duration of employment income nil rate period
  • transition arrangements
  • getting back on a social security pension or benefit, and
  • multiple employment income nil rate periods.

Summary

A recipient whose social security pension or benefit is not payable because of ordinary income, made up entirely or partly of personal and/or partner employment income (1.1.E.102), may qualify for an employment income nil rate period. During this period the recipient is considered to be receiving (1.1.R.55) a social security pension or benefit ONLY for the purposes of qualifying for the following:

  • child care subsidy
  • for the purposes of RA payments to their partner, have their partner treated as if both members of the couple are receiving a social security pension or benefit
  • for the purposes of applying the allowance income test to their partner, have their partner treated as if both members of the couple are receiving a social security pension or benefit
  • these supplementary benefits
    • language literacy numeracy supplement
    • approved program of work supplement
    • pensioner education supplement
    • telephone allowance
    • remote engagement program payment
  • retain their HCC or PCC.

If during an employment income nil rate period the recipient's income falls and their social security pension or benefit becomes payable again, the recipient's payment will recommence.

Explanation: The employment income nil rate period policy provides incentives for recipients to take up work, particularly substantial part-time or irregular casual work. It acknowledges the increasing casual nature of jobs and the lack of job security in some occupations, and enables recipients to get back onto payment easily during a nil rate period.

Act reference: SSAct section 23(4A) Despite subsection (4) …, section 23(4AA) For the purposes of subsection (4A) …, section 1061ZEA Further extended qualification rule: loss of payment because of employment income, section 1061ZMA Further extended qualification rule: loss of payment because of employment income, Part 2.13 Remote engagement program payment

FAAct section 3(1) Definitions

Policy reference: SS Guide 3.9.1.10 Qualification for HCC - automatic issue, 3.9.2.30 PCC extension rules

Qualification rules for an employment income nil rate period

Recipients qualify for an employment income nil rate period if their social security pension or benefit is not payable because of ordinary income, made up entirely or partly of personal and/or partner employment income and they:

  • are receiving a social security pension or benefit (except SpB)
  • remain qualified, (1.1.Q.10), for their social security pension or benefit, including meeting the employment qualifications (employment qualifications exist for CP and DSP, see example 4 below), and
  • continue to satisfy the payability provisions for their social security pension or benefit, except for being not payable due to the income.

In addition, recipients must continue to report their personal and/or partner income and changes in their circumstances each fortnight. Failure to do so will result in their employment income nil rate period ending and their payment being cancelled.

The following table gives an indication of which recipient groups may or may not qualify for an employment income nil rate period.

Note: This table is an indication ONLY, the recipient's individual circumstances MUST be assessed against the qualification rules above.

May qualify Will NOT qualify
JSP and YA (job seeker) recipients who take up paid work. Including full-time work. SpB recipients.
YA (student) recipients who participate in full-time study and start paid work. Recipients who do not have employment income and whose other ordinary (for example, investment or business income) increases.
DSP recipients who have paid work for less than 30 hours a week. DSP recipients, but not those on supported wages (1.1.S.430), who have paid work for 30 hours or more a week.
CP recipients who have paid work for less than 25 hours a week. CP recipients who have paid work for 25 hours or more a week.
Recipients who commence employment during their first instalment period and do not receive employment income that reduces their first instalment period to nil. Recipients who commence employment during their first instalment period and receive employment income that reduces their first instalment period to nil.
Recipients whose paid work is undertaken within an employee/employer relationship. Recipients whose income is from running a business.

Example 1: A recipient qualified for an employment income nil rate period.

Jamie is a university student receiving YA. Jamie is paid income from her job, as a part-time swimming instructor throughout the academic year, so does not build up a student income bank. After exams at the end of the year she increases the hours she works at the pool and her income takes her YA rate to nil. Jamie is still qualified for YA as she plans to study next year, but it is not payable due to her level of income. She is qualified for an employment income nil rate period. After 5 fortnights Jamie starts back at university, she drops back to part-time work and her rate of YA increases to a part rate of payment.

Example 2: A recipient qualified for an employment income nil rate period after taking up full-time work.

Fred is unemployed and receiving JSP. Fred commences full-time employment and his income takes his JSP rate to nil. With the exception of his employment income, Fred is still qualified for JSP. Fred continues reporting his income and is qualified for an employment income nil rate period. After 12 consecutive fortnights, Fred's employment income continues to reduce his JSP rate to nil and his payment is cancelled.

Example 3: A recipient commences full-time employment during their first instalment period.

Kimmy is unemployed and makes a claim for JSP. During her first instalment period Kimmy commences full-time employment, however, Kimmy does not receive her employment income until her second instalment period. As Kimmy’s first instalment period was not reduced to nil she is qualified for an employment income nil rate period for up to 12 consecutive fortnights provided she otherwise remains qualified for JSP and continues to report her income.

If in this example, Kimmy received employment income during the first instalment period that did not reduce her JSP to nil, enabling her to receive at least a part rate of JSP, Kimmy would still qualify for an employment income nil rate period.

If in this example, Kimmy received employment income during the first instalment period that reduced her JSP to nil, Kimmy would not qualify for an employment income nil rate period.

Explanation: A person must be receiving a pension or benefit to qualify for an employment income nil rate period.

Example 4: This example illustrates that recipients who lose their employment qualifications are not qualified for an employment income nil rate period. These recipients are:

  • DSP recipients who work 30 hours or more a week, and
  • CP recipients who work 25 hours or more a week.

Tanya is a DSP recipient who increases her work to 30 hours or more a week. Tanya is not qualified for an employment income nil rate period as she is no longer qualified for DSP (the first dot point in the qualification rules above).

If, during an employment income nil rate period, a recipient's circumstances change such that they no longer qualify for a pension or benefit or it is no longer payable, their employment income nil rate period ends and their pension or benefit is cancelled.

Examples of circumstances that will end an employment income nil rate period:

  • Loss of qualification
    • a CP recipient ceases being a carer
    • a PPS recipient's youngest dependent child turns 14.
      Note: A PP recipient going from single to partnered, or vice versa, is a change in rate, and not a qualification matter.
  • Recipient loses payability by having assets above the threshold.
  • Recipient loses payability by being imprisoned.

Partner's income & the employment income nil rate period

For couples, if a recipient loses payability because of their partner's income, part of which is employment income, the recipient is qualified for an employment income nil rate period, provided the recipient satisfies the qualification rules above.

For allowance couples who are subject to the partner income test, partner excess income that precludes payability of the recipient may mean that the recipient is qualified for an employment income nil rate period.

Explanation: The partner income test applies unless one member of a couple is a pensioner.

Example: Amy is receiving PPP and her partner Sean is receiving JSP. Sean gets a job and is paid over the partner excess income cut-out point. The excess income is high enough so that Amy's PPP is no longer payable. Because it was employment income that affected her payment, Amy will qualify for an employment income nil rate period.

Note: This works in the same way if all of Sean's income is employment income, or other ordinary income plus employment income. If none of Sean's income is employment income, Amy is not qualified for an employment income nil rate period.

For pensioner couples, if one recipient is paid employment income in a fortnight under the combined income test, half that income will be attributed to the partner once the income is combined and halved.

Example: Jane is caring for her elderly mother and receiving CP. Her husband Cameron is receiving JSP. Cameron gets a job and after the combined income test is applied, Jane's half of the combined income means that her CP is no longer payable. Cameron's income is considered to be employment income in Jane's income assessment so she will qualify for an employment income nil rate period.

Duration of employment income nil rate period

An employment income nil rate period starts on the date of effect of the nil rate determination and runs until 12 consecutive fortnights (24 weeks) after the end of the instalment period in which the nil rate determination happened. In effect an employment income nil rate period can last up to 12 to 13 fortnights, or until the recipient's social security pension or benefit is reinstated due to a drop in income whichever is the earlier. If the recipient doesn't have their income support reinstated their payment is cancelled at the end of an employment income nil rate period.

Example: Nancy commences employment and her working credit balance is reduced to nil on day 6 of the fortnight and her rate of payment is reduced to nil. She is eligible to receive the nil rate from day 7 to the next EPED, and for 12 consecutive fortnights following the EPED.

Note: In the case of DSP recipients, the employment income nil rate period runs concurrently with the 2-year return to work provisions (3.6.1.100).

Transition arrangements – 1 July 2024

From 1 July 2024 the duration of the employment income nil rate period was extended from 6 fortnights (12 weeks) to 12 fortnights (24 weeks). Recipients who commenced an employment income nil rate period before 1 July 2024 that ends on or after 1 July 2024 are qualified for an employment income nil rate period of 12 fortnights consecutive fortnights.

Act reference: SSAct section 23(4A)(h)

Getting back on a social security pension or benefit

If the recipient reports a fall in income during an employment income nil rate period (sufficient to give at least a part rate of social security pension or benefit) a rate increase enables the social security pension or benefit to be resumed without the need to lodge a new claim.

Multiple employment income nil rate periods

An employment income nil rate period can start only when a recipient has been receiving a payment of at least a part rate and then has an assessment that changes the rate to nil. Consequently, an employment income nil rate period cannot run immediately after a previous one, that is, during an employment income nil rate period, they cannot qualify to start another employment income nil rate period.

For a recipient to qualify for a second or subsequent employment income nil rate period their social security pension or benefit must have been resumed. Then their total ordinary income (of which employment income is a component) has to increase to reduce their rate of payment to nil. There is no limit to the number of employment income nil rate periods a recipient can have, provided they meet the qualification rules each time.

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