3.12.1 Pension supplement - qualification & payability
Introduction
This section explains the qualification and payability requirements for pension supplement (1.1.P.155) through the following related issues:
- qualification criteria
- transitional arrangements
- payability
- quarterly pension supplement (1.1.Q.60)
- rate of payment
- income and assets test
- taxation treatment
- overseas absences.
Qualification criteria
The following table sets out the qualification criteria for pension supplement:
| Payment | Criteria under which pension supplement is paid |
|---|---|
Age pension Carer payment
| Recipients receive pension supplement unless the transitional arrangements apply. For transitional arrangements, see below. |
Disability support pension Disability wage supplement | Recipients must:
Note: Recipients under 21 without dependent children receive the YDS, not pension supplement. For transitional arrangements, see below |
| Parenting payment (single) | Recipients who have reached the qualifying age for Age pension receive pension supplement. Recipients under the qualifying age for Age pension receive pension supplement basic amount, which is the former GST supplement. |
Parenting payment (partnered) Austudy payment Special benefit | Recipients must have reached the qualifying age for Age pension. |
Act reference: SSAct section 1064 to section 1068 Rate Calculators
Transitional arrangements
Pensioners receiving payments at 19 September 2009, who would have otherwise had a reduction in their pension as a result of the changes made to pensions from 20 September 2009 (that is, increase in the income test withdrawal rate from 40 cents to 50 cents, removal of the dependent child disregard free area) may have their pension paid under 'transitional arrangements'. The transitional rate is based on the income test rules and payment rates (indexed to CPI) that applied before 20 September 2009. The pension paid to transitional pensioners includes the person's pre 20 September 2009 pension (including the GST supplement and PhA) together with the value of UA and the higher rate of TAL and an increase.
Transitional rate pensioners continue to receive pension under the transitional rules until the pension payable under the new rules is the same or higher than the transitional rate of pension.
Act reference: SSAct Schedule 1A Savings and transitional provisions
Policy reference: SS Guide 5.1.8.40 Pension reform - transitional arrangements
Payability
Pension supplement accrues, and is payable for, each day that a person qualifies for pension supplement.
Pension supplement is paid fortnightly, with the person's regular payment.
Act reference: SSAct sections 1064 to section 1068B Rate Calculators
Quarterly pension supplement
The pension supplement includes a component known as the minimum pension supplement amount.
From 1 July 2010, pensioners may elect to receive this minimum pension supplement amount on a quarterly basis, instead of fortnightly.
A pensioner who chooses this option will receive a reduced amount of pension supplement with their pension each fortnight. The minimum pension supplement amount continues to accrue daily, building up until one of the quarterly payment days occurs.
Payments of quarterly pension supplement will be made as soon as possible after 20 September, 20 December, 20 March and 20 June each year.
The quarterly pension supplement is payable in relation to each day on which an election is in force.
The amount paid will exclude any minimum pension supplement amount that has been paid fortnightly since the last test day. It will also exclude payment for any days for which the person was not eligible to receive the minimum pension supplement amount (for example, if the person claimed a CSHC part way through the quarter).
Quarterly pension supplement instalments are calculated as follows:
- Calculate the daily rate by dividing the annual minimum pension supplement amount by 364.
- Note: The annual minimum pension supplement amount is set out in 5.1.9.10.
- Multiply this daily rate by the number of days in the quarter that the person was eligible to receive the minimum pension supplement amount.
Act reference: SSAct section 1061VA Quarterly pension supplement, section 1061VB Rate of quarterly pension supplement
Rate of payment
The annual rate of pension supplement, minimum pension supplement amount and pension supplement basic amount is set out in 5.1.9.10.
The daily rate of pension supplement is calculated by dividing the annual rate by 364.
Act reference: SSAct section 20A Pension supplement rate definitions, Chapter 3 General provisions relating to payability and rates.
Income & assets test
Pension supplement is added to a pensioner's MBR before the income test is applied.
The minimum pension supplement amount is the last to reduce when the income test is applied. It is also the amount which remains payable if any pension supplement is payable after the application of the income and assets tests.
Act reference: SS(Admin)Act section 43(4) and section 43(5) Payment by instalments
Taxation treatment
For taxation purposes pension supplement basic amount (the former GST supplement) is treated the same as the basic pension it is paid with.
Example: Pension supplement basic amount for a DSP recipient who is under the qualifying age for Age pension, is exempt from tax. However, it is taxable if the DSP recipient has reached the qualifying age for Age pension.
Any amount of pension supplement above pension supplement basic amount is referred to as tax exempt pension supplement and is non-taxable.
Act reference: Income Tax Assessment Act 1997 section 52-15 Supplementary amounts of payments
Overseas absences - temporary overseas absences
Pension supplement is payable if a person is residing in Australia and is either in Australia or temporarily absent from Australia for a continuous period of up to 12 weeks, provided this does not exceed the allowed portability period for the qualifying payment.
Where a person's qualifying payment can be paid overseas indefinitely, for example, Age pension and DSP (for those with indefinite portability), the pension supplement is payable only for the first 12 weeks of a temporary absence from Australia.
Overseas absences - permanent departures from Australia
If a person's departure from Australia is permanent, or becomes permanent after departure, the pension supplement ceases to be payable immediately as they are no longer residing in Australia.