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.

4.5.2 Further assessment of employment income earned between 1 July 1991 & 6 December 2020

Introduction

Schedule 1 to the Social Security and Other Legislation Amendment (Technical Changes No. 2) Act 2025 (the Act) inserts Part 3.11– Income earned from employment between 1 July 1991 and 6 December 2020 – into the SSAct.

Division 3 of Part 3.11 to the SSAct sets out the methodology for assessing and allocating pre-7 December 2020 employment income (Division 3 work income) to an entitlement period (1.1.E.125), and where necessary, to days in the entitlement period, based on the evidence available to the decision maker. The approach is consistent with the historical assessment of pre-7 December 2020 employment income, and together with the validation of income apportionment (4.5.1), ensures this income is treated the same regardless of when it was assessed.

These rules apply to any decision involving the assessment of Division 3 work income made after 5 December 2025 (the date of commencement of Part 3.11 of the Social Security Act 1991), and operate in relation to both original and review decisions.

Act reference: SSAct section 1117D Allocating Division 3 work income to entitlement periods—social security benefits and social security pensions, section 1117E Allocating Division 3 work income to entitlement periods—youth training allowance, section 1117F Allocating Division 3 work income to entitlement periods—former farm household support

Policy reference: SS Guide 1.1.E.125 Entitlement period, 4.5.1 Validation of the historical use of income apportionment

Overview of the methodology

To determine whether and how employment income earned between 1 July 1991 and 6 December 2020 is to be assessed under the methodology in Division 3 of Part 3.11, it is necessary to consider:

  • whether the income to be assessed was earned, derived or received in the relevant period, 1 July 1991 to 6 December 2020
  • whether it falls within the definition of Division 3 work income in section 1113 of the SSAct
  • what evidence is available about the income, and therefore, which method is to be used to allocate the income to a particular instalment period.

What is Division 3 work income?

Division 3 work income relates only to income earned by a person as an employee (4.3.3.20). It falls into 2 categories:

  1. From 20 September 2003 to 6 December 2020, the methodology in Division 3 applies to any income that falls into the definition of ‘employment income’ set out in section 8 of the SSAct at the relevant time, but does not include employment income that is received before the work to which the payment relates has been undertaken.
  2. If (a) does not apply, Division 3 income includes ordinary income of the person that is earned, derived or received, or that is taken to have been earned, derived or received, by the person from remunerative work undertaken by the person as an employee in an employer/employee relationship. This includes, but is not limited to:
    • salary and wages
    • commissions
    • employment related fringe benefits
  • But does not include:
    • superannuation payments
    • payments of compensation, or payments to the person under an insurance scheme, in relation to the person’s inability to earn, derive or receive income
    • a payment of ordinary income to the person that is received before the work to which the payment relates has been undertaken
    • a leave payment to the person in relation to which an income maintenance period arises under the SSAct as in force when the payment is received
    • a termination payment to the person in relation to which an income maintenance period arises under the SSAct as in force when the payment is received
    • a comparable foreign payment.

If income does not fall under the definition of Division 3 work income, it is to be assessed in accordance with the relevant policy and legislation (see, for example, 4.3 Ordinary income).

Act reference: SSAct section 1113 Definitions

Which assessment approach/method is to be used for decisions made after 5 December 2025?

Division 3 work income is to be allocated to an entitlement period using the appropriate method dictated by the relevant provision. Different allocation methods (called ‘approaches’) apply depending on the type of payment and the evidence available about when and how that income was earned, derived or received.

Sections 1117D, 1117E and 1117F set out rules for allocating income in relation to social security benefits and pensions (s1117D), youth training allowance (s1117E) and former farm household support (s1117F), respectively. Under each of these sections the appropriate approach for allocating income is to be determined based on the evidence available to the decision maker at the time a decision is made.

There are 3 possible assessment approaches, with a strict hierarchy of which approach is to be used depending on the evidence available:

  • The First Approach is used where the evidence is sufficient for the decision maker to allocate Division 3 work income to the entitlement period in which it was earned.
  • The Second Approach is to use income apportionment (as set out in the general income apportionment method statement in section 1114 of the Act) if the First Approach does not apply, but available evidence identifies the payroll period to which the Division 3 work income amount relates.
  • The Third Approach is to be used if neither the First nor Second Approach applies. It provides for Division 3 work income to be assessed in the entitlement period in which it is received, where neither the entitlement period in which the income was earned, nor a relevant payroll period can be identified.

The best evidence reasonably available at the time the decision is made is to be used to assess the employment income. The hierarchy of approaches ensures that decisions will be consistent with the historical assessment of pre-7 December 2020 employment income. It recognises that a lack of precise information as to when the income was earned should not prevent employment income from being taken into account when assessing a person’s means and that income being reflected in the person’s rate of entitlement.

Decision makers must follow the strict hierarchy of applicable approaches provided for in the Act. That is, the Second Approach may only be used if there is insufficient information to use the First Approach, and the Third Approach may only be used if there is insufficient information to use the Second Approach. This ensures consistent decision making. Where the same evidence is available about an amount of employment income, the same approach will be used to assess this income.

Note: The application of Division 3 is subject to the limitations of the definition of Division 3 work income in section 1113 of the SSAct. Therefore, income which is received BEFORE it is earned will be assessed according to provisions in the Act in force at the time and not under Division 3.

Example 1: First Approach - income assessed when earned:

A payslip shows that Donna earned Division 3 work income of $700 which fell wholly within a 14-day entitlement period. Under the First Approach, Donna would be taken to have earned $50 per day ($700 ÷ 14) on each day of that entitlement period.

Example 1A: First Approach – part of the income for a payroll period can be assessed when earned:

A payslip that shows that Donna, who was in receipt of NSA, received Division 3 work income of $960.40 for a 14-day payroll period. This includes $274.40 which is identified as being public holiday loading.

There was only one public holiday in the payroll period. The payroll period extends over two 14-day entitlement periods, with 7 days of the payroll period coinciding with the first entitlement period and the other 7 days falling into the second entitlement period. The identified public holiday falls into the first entitlement period.

In this case, the $274.40 is to be treated as income earned in the first entitlement period. Donna is taken to have earned $19.60 ($274.40 ÷ 14) on every day in the first entitlement period in relation to this employment income. The evidence is not sufficient to determine what part of the remaining Division 3 work income of $686 ($960.40 - $274.40) was earned in the first or second entitlement period. That remainder must be assessed in accordance with the next applicable approach in the hierarchy.

Example 2: Second Approach – income assessed using income apportionment:

Taking Example 1A above, there was not enough information to determine which of the 2 entitlement periods the remaining $686 was earned in. However, as the $686 is stated on the payslip, and the payslip contains a payroll period, the decision maker can apply the Second Approach.

As noted above, in this case, Donna’s payroll period extends over two 14-day entitlement periods, with 7 days of the payroll period coinciding with the first entitlement period and the other 7 days falling into the second entitlement period.

The $686 is assessed using income apportionment.

First the income in the payslip ($686) is divided by the number of days in the payroll period (14). This results in an amount of $49.

To determine the amount to be assessed in each entitlement period, the $49 is multiplied by the number of days the payroll period overlaps each entitlement period. This is 7 days for both entitlement periods. This gives $343 to be assessed in each entitlement period.

The $343 to be assessed in each entitlement period is then divided by the number of days in each entitlement period (14). This gives a daily rate of $24.50. That is, in relation to the employment income of $686, Donna is taken to have first earned, derived or received the amount of $24.50 on each day in both entitlement periods.

Noting that some of the total income from the payroll period was already allocated to Donna using the First Approach in Example 1A, the income amounts allocated to them under the First Approach must be added to the amounts allocated under the Second Approach. That means, in relation to the total employment income of $960.40 for the payroll period, Donna is taken to have earned, derived and received:

  • $617.40 in the first entitlement period at a daily amount of $44.10, consisting of $19.60 calculated using the First Approach and $24.50 calculated using the Second Approach.
  • $343 in the second entitlement period at a daily amount of $24.50, calculated using the Second Approach.

Example 3: Third Approach – income assessed when received (no evidence of date of earnings or payroll period):

Benjamin, a recipient of DSP, believed they were only required to report $200 of employment income per month over a 7-month period in 2019. However, Services Australia obtained bank records which show deposits of between $250 and $350 marked 'wages' at irregular intervals of between 7 to 10 days.

Benjamin confirmed that this was income paid by a casual employer with whom they are no longer in contact and who cannot be located by Services Australia. Benjamin indicates that they did not have a fixed work pattern, the employer did not provide them with any payslips and they do not know which precise period of work each payment relates to.

Each amount received by Benjamin is Division 3 work income. As it is not known when Benjamin performed the work, nor whether the payments were for particular payroll periods, neither the First nor Second Approach could be used.

Using the Third Approach, Benjamin is taken to have earned, derived or received the amount deposited on a particular day as the total income amount for the entitlement period in which the day of the deposit occurs, with 1/14 being the daily amount of that income amount for each day in the entitlement period.

For example, $350 of employment income is deposited in Benjamin's bank account on 5 February 2019. This date falls within their entitlement period of 29 January 2019 to 11 February 2019. As a result, Benjamin’s daily rate is calculated as $25 for each day in this entitlement period.

Act reference: SSAct section 1117D Allocating Division 3 work income to entitlement periods—social security benefits and social security pensions

Application of new methodology for debts affected by income apportionment

The new methodology for assessing employment income applies to any decision after 5 December 2025, including where a:

  • debt decision potentially affected by income apportionment has been on hold
  • past debt decision affected by income apportionment is subject to merits review, or
  • new debt is raised relating to pre-7 December 2020 employment income.

Generally, where a past debt decision affected by income apportionment is reviewed (including review by an ARO or the ART), the assessment of employment income will not change unless there is better information as to when the income was earned or an income amount is found not to be Division 3 work income.

Act reference: SSAct section 1117D Allocating Division 3 work to entitlement periods—social security benefits and social security pensions, section 1117E Allocating Division 3 work income to entitlement periods—youth training allowance, section 1117F Allocating Division 3 work income to entitlement periods—former farm household support

Last reviewed: