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3.4.7.130 Sample PBS top up calculations

Summary

There are 3 steps involved in working out a top up:

  • determining that there is a qualifying event for a top up
  • determining the highest rate of pension to use when calculating the top up, and
  • working out the difference between the amount of pension bonus originally paid and the amount payable using the highest rate of pension.

A qualifying event occurs when pension has increased within the 13 week top up period, because of a reduction in income/assets.

The highest rate of pension is the highest pension rate paid in the top up period that is at least partially because of a reduction in the assessed income/assets.

Note: Pension calculation rates in the examples below represent MBR plus the pension supplement component for pension bonus (PSCPB). Fictitious rates are used in the examples below where indexation is mentioned.

Example: Single person

Date Event
5 February 2020 Joe has accrued 5 years in the PBS when he claims Age and a pension bonus. For pension bonus purposes Joe's calculated rate of Age is $16,013.40 p.a. Joe's pension bonus is calculated using the base rate of Age and the PSCPB. His bonus comes to $37,631.50.
18 March 2020 Joe's assessed assets reduce because he takes a holiday. His calculated rate of Age is increased to $20,016.80 p.a.

Note: This is a qualifying event for a top up.

20 March 2020

Joe's calculated rate of Age increases to $20,817.40 p.a. because of the indexation of pension rates.

20 March 2020

 Joe receives an inheritance, which he invests. His calculated rate of Age decreased to $8,000 p.a.
13 week period from PBS start day ends -

Result:

  • Qualifying event is on 18 March 2020.
  • Highest calculated rate, due to a reduction in income/assets was $20,016.80.
  • The decrease in rate on 20 March 2020 is ignored. The top up is the difference between the pension bonus payable, based on a rate of $20,016.80 and the pension bonus amount originally paid.

Pension bonus payable with rate of $20,016.80 is $47,039.50 (20,016.80 × 5 × 0.47)

$47,039.50 − $37,631.50 = $9,408.00 top up

Example: Couple

Date Event
1 January 2020 John and Sharon have accrued 4 years in the PBS when they claim Age and pension bonus. Base rate plus PSCPB comes to $11,500 p.a. each. The pension bonus is calculated using this pension rate. It comes to $17,296 each.
1 February 2020 John and Sharon's income ceases. Their calculated rate is increased to $11,676.60 p.a. each.

Note: This is a qualifying event for a top up.
20 March 2020

John and Sharon's calculated rate increases to $11,690 p.a. each because of the indexation of pension rates.

Note: This is not a qualifying event.
13 week period from PBS start day ends -

Result:

  • Qualifying event is on 1 February 2020 (for both John and Sharon).
  • Highest calculated rate, due to a reduction in income/assets was $11,676.60.
  • The top up is the difference between the pension bonus payable, based on a calculated rate of $11,676.60 and the pension bonus amount originally paid.

Pension bonus payable with calculated rate of $11,676.60 is $17,561.60 ($11,676.60 × 4 × 0.376)

$17,561.60 − $17,296 = $265.60 top up (each)

Top up calculations where changes in couple status occurs during the accrual period for pension bonus

If there was a change in couple status over the pension bonus accrual period, SSAct section 93J(2) would have been used to calculate the original PBS payment. This uses a notional calculated rate that is based on a percentage of the maximum annual calculated rate.

The same principle is applied for top ups for these cases. The highest calculated rate of pension in the 13 weeks from the PBS start day will also be a percentage of the maximum annual rate.

Round percentages to 3 decimal places. The percentage of maximum rate payable at the qualifying event must be HIGHER than the percentage of maximum rate on the PBS start day in order for any amount of top up to be payable.

Example: Samantha accrues a bonus for 5 years - 3 years as a single person and 2 years as a partnered person. She is partnered when she claims PBS. Her original bonus is calculated using 80% of the maximum annual rate to a partnered person. Later, she has a qualifying event for a top up. Her highest calculated rate in the 13 weeks since the PBS start day is equivalent to 85% of the maximum annual rate. Apply 85% to the PBS calculation instead of 80% to determine the top up amount.

Her original bonus is calculated as follows:

(Annual notional single pension rate × Pension multiple × No. of single years during overall qualifying period) + (Annual notional partnered pension rate × Pension multiple × No. of partnered years during overall qualifying period)

  • ($21,351.20 × 0.47 × 3) + ($16,095 × 0.47 × 2)
  • Pension bonus payable = $45,234.50

Later when she has a qualifying event for a top up. Her bonus is calculated as follows:

  • ($22,685.60 × 0.47 × 3) + ($17,101 × 0.47 × 2)
  • Pension bonus payable = $48,061.60
  • Pension bonus top up = $48,061.60 − $45,234.50 = $2,827.10

Act reference: SSAct section 93J(2) Change in couple status during overall qualifying period

Qualifying event for top ups - members of a couple who separate within 13 weeks of the PBS start day

In some cases, a person will be paid a pension bonus and change couple status within 13 weeks from when the pension bonus was paid. A manual calculation of the top up amount may be required.

Some members of a couple will have a qualifying event for a top up based on a rate determination due to reduction in income/assets prior to their separation. If there has been no reduction in income/assets and corresponding increase in partnered rate before a couple separates, check for changes after the separation.

In order to check for this, the person's personal income/assets after separation should be compared with their share of the combined income/assets, prior to separation.

Example: If Alan has $200 in earnings and Daniel has $50 in earnings, their combined income is $250 and their share of the combined income is 50%, so $125 each. (Their personal income is $200 and $50 respectively).

When members of a couple separate and there is no difference between their share of combined income/assets and their new personal income/assets at the time of separation, a qualifying event has NOT occurred.

Example: If a couple holds $200,000 in combined assets, and when they separate they hold $100,000 in personal assets each, then there has been no change in assets. This does not constitute in itself, a qualifying event for a top up. A qualifying event may occur at a later stage if income/assets reduce and the person's single pension rate increases.

If there is a determination being made to change a person's couple status and to change their income/assets and these take effect from the same day, then the percentage of maximum rate becomes important when working out the 'highest rate of pension' paid in the 13 week top up period.

In the case where:

  • a determination is made that a person's personal income and/or assets at separation are less than their share of combined income/assets before separation, AND
  • the determination that changes the person's couple status has the same date of effect as the income/assets determination, AND
  • these combined changes result in an increase in the person's calculated rate,

then the PERCENTAGE OF MAXIMUM CALCULATED RATE on the start day and after the determinations should be compared. (Round the percentage to 3 decimal points.)

This is necessary because it is possible that the calculated rate may only have increased because of the change from partnered to single rate, that is, the reduction in income/assets alone, may not have been enough to cause an increase in rate.

If the percentage of maximum calculated rate decreases or stays the same, then no top up is payable.

Example: John's calculated rate is 50% of the maximum calculated partnered rate and his bonus is calculated on this amount. John separates from his partner, his calculated rate increases and he is now receiving 48% of the maximum single rate. Because the percentage of calculated rate has not increased, no top up is payable.

Example: Qualifying event before separation

Date Event
1 February 2020 Michelle and Chris have accrued 5 years in the PBS when they claim Age and pension bonus. Their calculated rate is $12,072.40 p.a. each. The pension bonus is calculated using this rate. It comes to $28,840.10 each.
18 February 2020 Michelle and Chris' joint income decreases, resulting in a calculated rate increase to $13,077.20 p.a. each.

Note: This is a qualifying event for a top up.
12 March 2020 Michelle and Chris separate. Their personal income and assets upon separation are the same as their share of combined income and assets that they had as a couple. They both receive an increase in calculated rate because they are moved to the single rate of pension. Their calculated rate becomes $17,347.80 p.a. each.
20 March 2020 Both Michelle and Chris' single calculated rate is increased due to the indexation of rates to $18,041.80 p.a. each.
13 week period from PBS start day ends -

Result:

  • Qualifying event is on 18 February 2020 (for both Michelle and Chris).
  • Highest calculated rate of pension, due to a reduction in income/assets was $13,077.20 p.a. each.
  • The top up is the difference between the pension bonus payable, based on a calculated rate of $13,077.20 and the pension bonus amount originally paid ($28,840.10).

Pension bonus payable with calculated rate of $13,077.20 is $30,731.40 ($13,077.20 × 5 × 0.47)

$30,731.40 − $28,840.10 = $1,891.30 top up (each)

Example: No qualifying event before separation & no change to income & assets at separation

Date Event
1 February 2020 George and Freda have accrued 5 years in the PBS when they claim Age and pension bonus. Their calculated rate is $12,072.40 p.a. each. The pension bonus is calculated using this calculated rate. It comes to $28,840.10 each.
12 March 2020 George and Freda separate. Their personal income and assets upon separation are the same as their share of combined income and assets that they had as a couple (and remain under the income and assets thresholds). They both receive an increased calculated rate because they are moved to the single rate of pension. Their calculated rate becomes $16,280.20 p.a. each.
20 March 2020 George and Freda's single calculated rate is increased due to the indexation of pension rates to $16,931.40 p.a. each.
13 week period from PBS start day ends -

Result

The top up is not payable to either George or Freda because no rate determination was made because of a reduction in the value of assessed income/assets.

Example: Changes to income & assets upon separation

Date Event
21 March 2020 Claude and Vera have accrued 2 years in the PBS when they claim Age and pension bonus. They are income tested and have $10,400 in combined income (so their share of combined income is $5,200 each).

Their calculated rate of Age is $19,702.80 p.a. each (97.932% of the maximum calculated rate). The pension bonus rate comes to $7,408.30 each.
12 April 2020 Claude and Vera separate and their income changes at the same time. Claude now has $3,000 p.a. in personal income and Vera has $7,000 p.a. in personal income.

The date of effect for the separation is the same date of effect as for the income changes. Both parties are moved to single rate.

Claude's maximum single calculated rate is $26,689 (100% of the maximum calculated rate). Vera's rate is $25,659 (96.141% of the maximum single calculated rate).
13 week period from PBS start day ends -

Result for Claude:

  • Qualifying event is on 12 April 2020, because Claude received an increase in Age due to a reduction in income.
  • Highest calculated rate, due to a reduction in income/assets was $26,689 p.a.
  • The top up is the difference between the pension bonus payable and the pension bonus amount originally paid.

Pension bonus payable with 100% of maximum calculated partnered rate is $7,564.70 ($20,118.80 × 0.188 × 2).

Top up = $7,564.70 - $7,408.30 = $156.40

Result for Vera

No qualifying event has occurred for Vera. Even though her rate of Age reduced, it did not change her rate of pension bonus (as the highest rate of Age within the 13 week period from the start date is used to calculate the bonus). No top up is payable.

Top ups - single at start day, partnered within 13 weeks

A significant change in income/assets may result in a person receiving a top up even though they have been changed from single to partnered rate since the PBS start day.

The same basic rules that apply to separations occur to partnering or re-partnering as follows:

  • Determine if a qualifying event has occurred. If a change in couple status occurs at a different time to the change in income/assets, then compare personal income and assets before the person became a member of a couple with their share of combined income/assets after they became partnered to ensure a reduction has occurred. Also ensure that the calculated rate increased when the income/assets changed.
  • If the determination to change the person's couple status has the same date of effect as the rate determination that reduced the assessed income/assets, compare the percentage of maximum calculated rate of partnered pension with the percentage of maximum calculated single rate.
  • The top up is based using the highest calculated pension rate (or highest percentage of maximum rate) paid in the 13 weeks that resulted from the reduction is assessed income/assets.

Example: Changes to couple status in accrual period & the top up period, & change of income

Date Event
21 March 2020 Gary has accrued 5 years in the PBS when he claims Age and pension bonus. He was partnered for 3 years and single for 2 years during the accrual period. He is single when he claims his pension bonus.

Gary has income of $10,000 p.a. His income tested calculation rate is $24,159 p.a. (90.52% of the maximum calculated rate). The pension bonus is calculated using this pension rate (2 years as a single person and 3 years as a partnered person). Pension bonus comes to $48,387.70 using SSAct section 93J(2).
12 April 2020 Gary becomes a member of a couple. Gary now has income of $2,000 p.a. and his new partner, Linda, has income of $1,000 p.a. Linda does not claim a pension bonus.

The date of effect for the member of a couple determination is the same as the date of effect for the income changes. Gary and Linda's calculated partnered rate is $20,118.80 (100% of maximum partnered rate).
13 week period from PBS start day ends -

Result for Gary:

  • Qualifying event is on 12 April 2020. Gary received an increase in the percentage of maximum rate of pension with a reduction in income.
  • Highest calculated rate of pension due to a reduction in income/assets was $20,118.80 p.a.
  • The top up is the difference between the pension bonus payable, and the pension bonus amount originally paid.

Pension bonus payable using the pension rate is $53,455.20 (calculated single rate of $24,159 × 0.47 × 2 plus calculated partnered rate of $18,211.50 × 0.47 × 3)

$53,455.20 − $48,387.70 = $5,067.50 top up

Act reference: SSAct section 93J(2) Change in couple status during overall qualifying period

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