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.

5.4.1.35 Formula for calculating certain pension advance payments

Summary

This topic outlines the calculation of advance payments for the following pension payments:

  • age pension
  • disability support pension, and
  • carer payment.

This topic does not apply to PPS.

Advance payment qualifying amount (APQA)

For a person receiving a social security pension worked out under Pension Rate Calculator A, the APQA is the sum of:

  • the person's MBR of pension relevant to the relationship status of the person (i.e. single or partnered), and
  • the person's pension supplement amount plus the energy supplement less the minimum pension supplement amount.

If a person is receiving a social security pension worked out under any other pension rate calculator in the SSAct (other than Pension Rate Calculator A), the amount of the person's APQA is worked out as if the person were receiving a social security pension worked out under Pension Rate Calculator A.

The APQA is an annualised amount.

Examples of APQA calculation (using 20 March 2023 pension rates)

Single MBR pensioner

  • The maximum basic pension rate plus the pension supplement plus the energy supplement (minus the minimum pension supplement)
    = $971.50 + ($14.10 + $78.40)
    = $1,064.00 – 42.20
    = $1,021.80 x 26
    = $26,566.80

Partnered MBR pensioner

  • The maximum basic pension rate plus the pension supplement plus the energy supplement (minus the minimum pension supplement)
    = $732.30 + ($10.60 + $59.10)
    = $802.00 - $22.40
    = $779.60 x 26
    = $20,269.60

Act reference: SSAct section 23(1)-'advance payment qualifying amount', section 1064-A1 Method of calculating rate, section 1064-A2 Members of a couple, section 1064-B1 Maximum basic rate

Disqualification for an advance payment

A person is not qualified for a pension advance payment if:

  • the maximum amount of advance payment to which the person would be entitled is less than 1/52 of the person's advance payment qualifying amount (rounded to the nearest cent (rounded 0.5c upwards))
  • the amount of the advance payment that a person received in full more than 12 months ago has not been fully repaid, or
  • the person owes a debt to the Commonwealth that is recoverable under the SSAct Part 5.2, by means of deductions from the person's social security payment.

Act reference: SSAct Part 5.2 Amounts recoverable under this Act, section 1061A(3) Disqualification - age, disability support, wife and widow B pensions and carer payment

Maximum amount of advance payment

The amount of an advance payment is the smaller of either:

  • the amount of the advance payment sought (must be equal to or greater than the minimum advance qualifying amount), or
  • the maximum amount of advance payment that is payable to the person as worked out under the following method statement.

The advance payment method statement provides the rules for determining the maximum amount of the advance payment on a step-by- step basis.

Step Method
1 Calculate an amount that is equal to 3/52 of the person's APQA.
2 Calculate 7.5% of the rate of the person's social security pension payable on the last payday before the application for the advance payment was lodged, minus amounts paid as RAA and the minimum pension supplement.
3 Work out the smaller of the result of step 1 and the result of step 2.
4

Subtract from the result of step 3:

  • each advance payment (if any) of a social security entitlement paid to the person during any of the 13 fortnights immediately before the application for the current advance payment was lodged
  • each other advance payment (if any) of a social security entitlement paid to the person that has not been fully repaid.
5 The result of step 4 (rounded to the nearest cent (rounding 0.5c upwards)) is the maximum amount of advance payment payable to the person.

Example of method statement process (using 20 March 2023 pension rates for a single MBR pensioner)

Step Method
1 Three weeks of the maximum basic pension rate plus the pension supplement plus energy supplement (minus the minimum pension supplement)
= $971.50 + ($14.10 + $78.40)
= $1,064.00 – 42.20
= $1,021.80 x 26
= $26,566.80 ÷ 52 x 3
= $1,532.70
2 $26,566.80 x 7.5% = $1,992.51
3 The smaller of $1,532.70 and $1,992.51 is $1,532.70.
4 In this example no previous advances were paid in the last 13 fortnights immediately before the application was lodged, nor were there any outstanding advances not fully repaid in the last 12 months.
5 $1,532.70 (rounded to nearest cent (rounding 0.5c upwards) is the maximum amount of advance payment payable to the person.

Act reference: SSAct section 1061ECA Amount of advance payment

Minimum advance payment amount

The minimum advance payment amount that can be paid is equal to or greater than 1/52 of the APQA relevant to the person's relationship status.

Based on information used in the above APQA calculations for the minimum advance payment amount would be:

  • single pensioner - $26,566.80 ÷ 52 = $510.90
  • partnered pensioner - $20,269.60 ÷ 52 = $389.80.

Act reference: SSAct section 1061A(3)(a) Disqualification - age, disability support or carer payment

Drawdown options

It is not possible to cover all drawdown options in the scenarios in the example below, however, the general rule is that the combined sum of advances granted in a 13 fortnight period cannot exceed the maximum amount payable to the person and cannot be less than the minimum advance amount.

Example: Joan is a single pensioner receiving the MBR of pension and pension supplement and energy supplement of $1,064.00 per fortnight. She applies for a pension advance for the first time.

Option A:

Joan elects to obtain the maximum amount of $1,532.70. An amount of $117.90 per fortnight would be recovered for the next 13 fortnights. This deduction would reduce the amount she would be paid to $946.10 per fortnight for those 13 fortnights. She would not be able to be paid another advance for another 13 fortnights.

Option B:

Joan elects to obtain the minimum advance of $510.90. An amount of $39.30 per fortnight would be recovered for the next 13 fortnights.

She would be able to request a second advance of up to $1,021.80 at any time in the 13 fortnights ($1,021.80 = maximum amount payable of $1,532.70 minus first advance amount of $510.90). If Joan were to obtain an additional advance of $1,021.80 her deduction amount each fortnight would increase to $117.90. Each advance is recovered separately. Following the repayment of the first advance, deductions would reduce to $78.60 per fortnight unless she took out another advance of $510.90.

Alternatively, Joan could request 2 further advances of $510.90 in the next 13 fortnights. If she were to take this option her deduction amount would increase by $39.30 each fortnight each time she took out an advance. Each advance is recovered separately totalling $117.90 per fortnight. Following the repayment of the first advance, deductions would reduce to $78.60 per fortnight unless she took out another advance of $510.90.

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