Tuesday, 16th of January, 2018

Income and Government Assistance

Superannuation

Acknowledgments

We would like to thank Paul Bingham, Barrister, for contributing this chapter through the Fitzroy Law Handbook Online. A particular thanks to the Fitzroy Legal Service for permission to reproduce this chapter here.

Superannuation Schemes and Benefits

What to Know About Superannuation

The Government encourages saving for retirement in a variety of ways, mainly by giving superannuation tax concessions.

There are three times at which tax is important: when money goes into the fund, while it is there, and when it comes out.

Money contributed to superannuation can be taxed at 15%, but it can also gain the contributor a tax benefit. Money in a superannuation fund can make income and capital gains that are taxed at concessional rates while the fund has not yet started to pay a benefit, but are not taxed after the fund has started to pay a benefit. Money that comes out of the fund is not taxed, unless the money comes out before the beneficiary has turned 60 years of age, in which case a benefit for which a tax deduction has been claimed is taxed but with a 15% offset.

What is a superannuation trust?

Virtually all private sector superannuation schemes in Australia are organised through the legal device of a trust. A trust is a form of ownership of property in which one person (the trustee) is the legal owner of the property, but is under a legal obligation to use the property exclusively for the benefit of another person (the beneficiary). In the case of a superannuation trust, the rights and obligations of the trustee and beneficiaries (often called "members") are set out in a document called a "trust deed".

The trustee of a superannuation fund may be a company or one or more individual people. Some commercial organisations (usually associated with insurance companies) act as trustees for a large number of employers under a single trust deed.

Some public sector superannuation schemes are not set up as trusts. The rights of members of these schemes depend on the legislation governing them.

The legal principles governing the law of trusts were developed in cases concerning trustees who administered, without payment, sums of money made available to the beneficiaries through gifts and wills. As will be apparent from this chapter, these principles are, arguably, inappropriate to determine the rights of members of modern superannuation schemes, where the benefits are provided in a commercial context, frequently in substitution for wages under awards and contracts of employment.

Contributions

Superannuation Guarantee

The Superannuation Guarantee (Administration) Act 1992 (Cth) has the practical effect that an employer must contribute 9% of "ordinary time earnings" as superannuation for its employees into a superannuation fund unless the employee is paid less than $450 a month; is aged 70 or over; is not a resident of Australia and the work is done outside Australia; or is under 18 and working 30 hours a week or less (ss27 & 28).

Contributions are made to "complying" superannuation funds or retirement savings accounts and should be made within 28 days of the end of the relevant quarter.

The 9% is calculated against ordinary time earnings up to a quarterly limit. In 2012/13 financial year this limit is $45,750. The Australian Taxation Office (ATO) has provided guidance about what "ordinary time earnings" means in Superannuation Guarantee Ruling SGR 2009/2. ATO Rulings provide guidance only and do not have the force of law.

Different rules apply to "defined benefit" superannuation schemes (see: "Types of benefits" under "Choice of Superannuation Funds", for an explanation of defined benefit superannuation schemes).

Salary Sacrifice

If the employer and the fund agree, an employee may make further contributions, within strict limits, under "salary sacrifice" and other arrangements. This can mean that instead of paying tax at the individual's marginal tax rate on the amount "sacrificed", tax is paid at a concessional rate of 15%. This will still usually be a lower tax rate than the marginal rate that would otherwise apply. Tax on concessional contributions for persons with pre-tax earnings of $300,000 or more is 30%.

In 2012/13, the maximum that can be contributed and attract a tax deduction is $25,000.

Personal Contributions

No tax benefit is obtained by a simple voluntary contribution by an employee, although the income and capital gain later obtained on that contribution is taxed at concessional rates.

Self-employed persons (those who earn 90% or more of their income from self-employment) may obtain tax deductions up to the age-based limits referred to in "Salary sacrifice", above.

There is no tax on voluntary contributions that did not attract a tax deduction (called "non-concessional contributions"). However, for a person aged under 65 years, only $150,000 per year, or $450,000 over three years, may be contributed on a non-concessional basis.

Co-Contribution

Employees and certain self-employed people with annual assessable income and reportable fringe benefits up to $61,920 will get a government "co-contribution" of up to $1,000 for an eligible personal contribution of $1,000 to a complying superannuation fund or retirement savings account. The maximum amount is paid if the person's "total income" is $31,920 or less, reducing gradually to nil for incomes of $61,920 and above.

Low Earning Spouse

Taxpayers can claim an 18% tax rebate on superannuation contributions of up to $3,000 made on behalf of their low income or non-working spouse.

Small Accounts

If an account has $1,000 or less in it, it cannot be reduced by fees that are greater than the interest earned by the account.

Superannuation Surcharge

The superannuation surcharge was abolished from 1 July 2005.

Reasonable Benefit Limit

Reasonable benefit limits (RBLs) were abolished from 1 July 2007.

Age Restrictions

Before age 65, a person can make further tax deductible contributions even if they are not working. Between ages 65 and 75, a person can make further tax deductible contributions so long as they work for at least 40 hours in a period of 30 consecutive days.

There is no longer any obligation to draw down monies from a superannuation fund at any age. However, not taking a pension when one is available means the loss of the benefit being that a fund paying a pension is not taxed on its investment returns.

Eligible Termination Payments

Most eligible termination payments (now known as "employment termination payments") cannot now be rolled over into superannuation. (For further information about eligible termination payments and employment termination payments see the Taxation chapter.)

Lost Superannuation

When a worker goes from one job to another, they may be required to join a different fund. It is important that the money in the previous fund is not forgotten. The money can be moved or "rolled over" to the new fund. The ATO keeps a register of "lost" money. Contact the ATO or visit the website if you think that you have lost track of superannuation money (see: "Contacts", at the end of this chapter).

An alternative for people who have many small jobs is to start a "retirement savings account" with a financial institution, into which all employers can pay small amounts of superannuation.

Superannuation guarantee levy

If employers do not contribute 9% as described above, a "superannuation guarantee charge" has to be paid to the ATO, which then contributes the net amount to superannuation to benefit the employee. This is calculated against an employee’s "salary or wages", which may be more than the employee's ordinary time earnings. See the Superannuation Guarantee Ruling SGR 2009/2.

The levy is only payable in respect of employees, not contractors. Difficult questions arise about whether a person is a contractor. The High Court has found, for example, that a bicycle courier employed as a contractor was an employee, but a motor vehicle courier was a contractor. The ATO website at www.ato.gov.au has a "Guide to contractors" tool to help work out if a person is an employee or a contractor.

From 1 July 2003, the employer should pay superannuation guarantee contributions at least once each quarter, on 28 October, 28 January, 28 April and 28 July in each year. The employee should be notified on a pay slip, letter or email. If these amounts are not paid, then the employee could be disadvantaged if the company becomes insolvent. If notification is not received at the appropriate time, contact the superannuation fund or the ATO. In United Super Pty Ltd v Built Environs Pty Ltd [2001] SASR 339 (not accessible online), it was held that a super fund was in breach of trust and breach of contract where it did not inform a member that payments by the employer had ceased.

However, the ATO is not active in enforcing payment; the charge is paid only if the employer is still solvent and the employee misses out on benefits like insurance.

Choice of Superannuation Funds

From 1 July 2005, about half of Australia's employees are able to choose the superannuation fund into which their contributions are paid. The choice made could have a big effect on the type and amount of benefit available, and it is worthwhile considering the benefits available before a choice is made.

The first thing to consider is the type of benefit you currently have and the varieties of fund available. If the employee does not nominate a fund, the employer will pay the benefit into a default fund. Whilst all default funds (except "retirement savings account" funds) have to offer minimum age-based death insurance from 2007, much better insurance benefits may be available.

Types of benefits

There are two basic types of benefits: defined benefits and accumulation benefits.

Defined benefits

The defined benefit fund pays a set benefit, usually a multiple of the worker's annual salary, perhaps averaged over the three years before retirement on ceasing work. The worker has to have a considerable number of years of service before the full benefit is paid. If the worker leaves before the minimum number of years for a full benefit, the benefit is usually calculated on years of service and salary. This has the effect that the higher paid and longer serving employees benefit the most. The investment performance of the fund does not affect the benefit paid. The employer takes the risk of the investment performance of the fund.

Public service schemes and company schemes are often of this sort. The benefits are generous in comparison to the accumulation funds discussed below, and these schemes are becoming rarer. Advice should be taken before moving funds out of this sort of scheme.

Accumulation benefits

The other sort of scheme, the accumulation fund, repays contributions together with whatever investment income has been obtained. This means that the final benefit paid depends on the amount originally contributed (less tax and administration fees) and whatever return the investment of that amount has produced for the time it has been in the fund. Obviously, the contributor (rather than the employer) takes the risk of poor investment performance, or that (for example) the share market is depressed at the time of retirement.

Varieties of superannuation funds

There is a variety of superannuation providers.

For many employees, their award or other agreement used to (but in many cases no longer does) require contributions to a particular fund. Often, this fund is controlled jointly by employers and unions, a so-called "industry fund" covering many employees in a particular industry. For example, the Construction and Building Unions Superannuation Fund (CBUS) covers workers in the building industry, although most funds are now trying to attract members outside their traditional base. These funds are generally run on a non-profit basis, so administration fees are usually low. Employers and unions are represented on the board of the trustee, which makes decisions about where the contributions are invested and what benefits are available to members.

In other cases, the employer has set up or arranged a particular fund for its employees, and the employer effectively provides the administration for the fund. Increasingly, employers are turning over such funds to professional administrators that charge commercial fees for administration. These are usually referred to as "company schemes".

In other cases, the employer chooses a "master trust" type of arrangement, in which a large financial organisation, for example a life insurance company, sets up a commercial fund that can service many employers. Often, the fund is invested with the associated life insurer or by the associated funds manager.

Employees of the Commonwealth Government have their superannuation paid into the Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme or the PSS Accumulation Plan.

Employees of Tasmanian state government instrumentalities have their own superannuation schemes. These have been much amalgamated and in some cases had benefits reduced in recent years. There is still a variety of schemes and benefits, such as the Emergency Services Superannuation Scheme and RBF. Some of these schemes are controlled by an Act of Parliament. Other schemes are controlled by a trust deed and a trustee.

There are also superannuation schemes available to individuals outside the employment context. Most large financial institutions provide a master fund type scheme in which the individual makes contributions to provide for their retirement to a commercial trustee who invests the funds. Banks and other institutions also provide retirement savings accounts that have the same function, although they seem to produce lower returns than others.

Individuals (usually self-employed people) can also set up private superannuation funds (the so-called DIY or self-managed super funds (SMSF) funds). In such a fund, each member has to be involved in the management of the fund, and there are strict limits on what can be done with the money. Such funds are not economically feasible if the amount of funds is less than about $250,000.

Features of superannuation funds

Usually, defined benefit schemes are much more generous than accumulation type schemes. Therefore, a person in a defined benefit scheme will usually be better off staying in such a scheme than shifting to any type of accumulation scheme.

If a person is already in an accumulation type fund, then there are probably four main things to consider before either deciding to stay in the current fund, or shifting to a new fund.

The first thing to consider is the investment performance of the fund. The main job of a superannuation trustee is to invest your money to generate strong consistent returns. It is dangerous to judge a fund only on the performance in the past year, so it is a good idea to look at the investment performance of the trustee over the past five or 10 years.

Take into account, also, that a variety of investment options are usually available to fund members. For example, there may be a conservative (capital stable) option, a balanced option and a growth option, depending on the member's appetite for risk. So, it is worthwhile looking at the investment performance of the trustee in respect of each available option.

The second thing to consider is the fees and charges of the trustee. An average superannuation fund charges about 1.3% of the funds under management for investing and administering the fund. Some public sector funds charge less than 0.5%. Some funds charge 3%. Because "industry" funds and public sector funds are "not-for-profit", the fees charged by these funds should, ordinarily, be lower than the fees charged by the funds run for profit.

The third thing to consider is the insurance benefits available. Death, disability and sometimes income protection benefits are some of the most significant benefits available in superannuation. It is generally cheaper to buy insurance through the superannuation fund because the fund can negotiate a cheaper price for volume. Often, insurance is available without reference to previous medical history. Look very carefully at the definition of "disability" in the insurance policy as this can be the difference between obtaining an insurance payout and the benefit being refused. Also, moving from one insurance policy to another can mean that the new insurer may require a health check.

The fourth thing to consider is the other type of services or benefits available. Some funds offer cheap home loans, financial products, newsletters or shopping and travel discounts.

Money in the fund

Tax Concessions

Generally, benefits paid are only taxed if the beneficiary is below 60 years of age. The tax rate (once above a certain threshold) is 15% less than the beneficiary's marginal rate. This is in addition to the 15% tax on contributions. However, the tax on benefits paid is payable only on retirement or earlier payout of benefits.

Superannuation funds have the advantage that they pay tax of 15% on their income and 10% on their capital gains on assets held for 12 months. This means that money in superannuation should grow more quickly than money invested in a person's own name, so long as the person is paying a marginal rate of tax above 15%.

A person's tax file number must now be given to the superannuation fund in order to avoid being taxed at the top marginal rate.

Taking benefits

At age 65, a person can take their superannuation benefits. Before that age, a person must satisfy a "condition of release" to take superannuation benefits. Between ages 60 and 65, resigning from a job is a condition of release. Between ages 55 and 60, ceasing full time work (10 hours per week) is a condition of release.

If you are below 55 years of age, see "Preservation" under "Superannuation Benefits".

Taxation, Pensions and Lump Sums

Taxation

If the beneficiary is 60 years of age or more, all pensions paid from a taxed source are tax-free. If the beneficiary is over 60 and retired, or is over 65 years of age, lump sums paid from a taxed source are tax-free. If the pension is not paid from a taxed source (such as certain government pensions) certain elements of the pension are taxed at a concessional rate.

If the beneficiary is between 55 and 60 years of age, a lump sum up to the amount of $150,000 is free of tax. The amount of tax payable on pensions and the remaining part of any lump sum over $150,000 depends on the amounts of the tax-free component and the taxable component, the nature of the benefit and when the contribution was made. For example, the part of a lump sum relating to contributions made before July 1983 is not taxed, whereas the part relating to contributions made later may be taxed at the person's marginal rate less the tax offset of 15% (therefore, a person on a 31.5% marginal rate would pay 16.5%). Further details are available in Withholding Schedule 12, "Tax Table for Superannuation Lump Sums" (NAT 70981).

It is no longer possible to access the concessional and non-concessional components other than in the proportion they bear to the whole of the fund (unless the fund is split into two funds).

The amount of tax payable may also depend on the age at which the benefit is taken. If the benefit is taken before age 55, the tax rate may be higher.

The taxation of benefits can also be delayed by "rolling over" the benefit into a particular type of fund, and letting it accumulate, rather than taking the benefit as soon as it is available.

The advantage of starting to take benefits is that capital gains and income into the fund are no longer taxed.

Pensions and Lump Sums

Benefits can often be taken either as a lump sum, or as a pension. There can be taxation advantages of taking a pension for those aged less than 60, but the tax-free initial amount of $150,000 applicable to a lump sum does not apply to a pension, and this could be disadvantageous.

There has been considerable change in the types of pensions available. Until recent tax and social security changes, there were five different types of pension, which had different features relating to the now abolished reasonable benefits limit, different social security features and different payment and investment features.

From 1 July 2007, any pension is allowed that meets certain minimum standards relating to minimum annual payments (for example, the annual payment for a beneficiary aged 55–64 must be at least 4% and no more than 10% of the account balance, although certain concessions apply in the 2012-13 financial year).

From 20 September 2007, 100% of the assets of any pension are assets tested for social security purposes. It is important to obtain advice if a pension has been started before 20 September 2007. It may be worthwhile for people who have already started receiving a pension to see whether it would be worthwhile stopping the pension and commencing a new one.

For people aged over 55 and still working, there can be benefit in a "transition to retirement" pension, which allows a person to receive a superannuation pension with a 15% tax offset and still contribute to superannuation. Effectively, this could reduce the tax payable on the earnings whilst maintaining the previous gross cash income. The pension is not commutable until retirement or age 65.

It is important to take professional advice about the type of pension that you choose.

Regulation of Funds

Almost all private sector superannuation funds are regulated by the Superannuation Industry (Supervision) Act 1993 (Cth) ("SISA"). These are called regulated funds. Funds operated by Commonwealth, state and local government bodies, and by public sector bodies established by statute, are often not regulated. Funds with less than five members (exempt funds) are exempt from many of the regulatory requirements.

The SISA (and many statutes controlling public sector bodies) controls the way in which trustees exercise their power. For example, it ensures that each regulated fund trustee must covenant to act in a way that a person who felt morally obliged to provide for a beneficiary would act.

Superannuation Benefits

Trust deeds provide for benefits to be paid to members and their dependants in different circumstances. These include resignation, retirement, total and permanent disability, total and temporary disability, and death benefits.

Trustees normally have no discretion in relation to the payment of resignation or retirement benefits. Disputes concerning these benefits are rare, and usually concern calculation of the amount of the benefit.

Preservation

The bulk of superannuation benefits are "preserved" and cannot normally be paid to a person until they retire after a certain age (see: "Access to benefits", following), reach age 65, become permanently incapacitated, permanently depart from Australia, suffer severe financial hardship, or suffer temporary incapacity, or on compassionate grounds.

Benefits contributed before 1986 or 1990 (depending on the fund involved) are generally not preserved. Undeducted contributions (that is, those on which a tax deduction was not claimed) were generally not preserved until 1 July 1999. Since that date, all contributions are preserved (or, more accurately, restricted).

Access to benefits

There may be some unpreserved benefits that can be accessed before retirement and some preserved benefits can be accessed in an emergency. The relevant age for the retirement of a person born before 1 July 1960 is 55 years. This increases to 60 for those born after 30 June 1964, with transitional ages for those born between those dates.

However, if a person has been in receipt of a pension, income-support supplement or benefit as defined in section 23 of the Social Security Act 1991 (Cth) (a list can be obtained by telephoning Centrelink on 13 23 00) for a continuous period of 26 weeks, and if the fund's trust deed allows early release, the funds can be released early. A letter confirming the period and nature of the payment (obtainable by telephoning 13 23 00) must be attached to an application form (obtainable from the trustee of the fund) and forwarded to the trustee of the fund.

Funds can also be released early for medical treatment, medical transport, modification of a house or car for a disabled person, death, funeral, burial or palliative care expenses, or for mortgage payments to stop a mortgagee from selling the person's home. The application is made to Centrelink. See their information on early release of superannuation.

Some credit providers encourage debtors to access superannuation funds to pay a mortgage, even though the mortgage may not be viable in the longer term, meaning that both the house and the superannuation are eventually lost.

Age and superannuation

There is a pension bonus scheme available to a person who defers claiming the age pension, registers and meets a work test. The maximum bonus available for a single person deferring the pension to age 70 is $41,462.50. This scheme is available only to those who qualified for the Age Pension before 20 September 2009.

Information from funds

A member of a regulated fund is entitled to certain information to be provided automatically by the fund. This includes:

  • an annual member statement showing the amount of the benefit at the start and end of the year (generally 1 July to the next 30 June), the preserved amount and fund contact details, and the value of the benefit on resignation or retirement, including death and disability benefits;
  • an annual fund report showing the fund's financial position and performance; and
  • notice of any changes that affect the member, such as any change to the fund rules.

A member is also entitled to other information on request.

Superannuation and bankruptcy

Some superannuation entitlements are protected if a person goes bankrupt, meaning that the creditors cannot take the superannuation savings. The bankrupt retains the benefit of monies in a regulated (and certain other types of) superannuation fund up to the pension reasonable benefit limit.

However, a payment to a superannuation fund may be caught by the relation back or avoidance provisions of the Bankruptcy Act 1966 (Cth), even though that payment gives rise to the interest in the fund, which is protected: Official Trustee in Bankruptcy v Trevor Newton Small Superannuation Fund Pty Ltd [2001] FCA 1267.

Superannuation Benefit Disputes

Death benefit disputes

Disputes about death benefits are common. In addition to the benefits which have accumulated in the fund at the date of death, many funds provide substantial life insurance benefits, which are added to the accumulated benefit.

The death benefit is, however, usually not paid according to the will of the deceased, but is paid according to the discretion of the trustee of the fund in accordance with the trust deed. The trust deed usually sets out a description of the class of people to whom the benefit can be paid, typically the immediate family of the deceased or those wholly or partially dependent on the deceased.

It is now possible for a member to nominate the recipient of a death benefit in such a way as to make the nomination binding, and avoid having the trustee make a decision and possibly begin a dispute.
Disputes can arise between possible beneficiaries about whether, for example, a particular person is wholly or partially dependent on the deceased; or, if more than one person satisfies the description of the class of beneficiaries, whether the trustee should exercise its discretion to determine how the benefit should be divided between the claimants. These problems become acute when the deceased was involved in more than one family during life.

Factors often taken into account by trustees include:

  • whether the deceased nominated a preferred beneficiary and, if so, whether any event has occurred since the nomination which might have invalidated the nomination;
  • the comparative financial need of the claimants;
  • any amount to which a claimant is entitled from the estate of the deceased;
  • the extent of the financial dependency of the competing claimants on the deceased; and
  • the closeness of the relationship between the competing claimants and the deceased.

The Superannuation (Resolution of Complaints) Act 1993 (Cth) allows a potential beneficiary who is dissatisfied with a decision made by a trustee to complain to the Superannuation Complaints Tribunal (SCT) (see: "Review in the Superannuation Complaints Tribunal", under "Reviewing a Trustee's Decision").

The SCT is only able to deal with the complaint if the complainant notifies it within 28 days of receiving a notice from the trustee that the payment will be made. That notice should also state that the complainant has a period of 28 days in which to complain to the SCT.

Superannuation and family law

From 28 December 2002, a person's superannuation entitlements can be divided between married couples that divorce. The division can either be voluntary or ordered by the court. This can only be done in respect of married couples or divorced married couples.

Regulations set out the methods of valuing superannuation interests. Obviously, whether the benefit in question is a defined benefit or an accumulation benefit makes a difference to the valuation method. The regulations also set out the way in which the payment split is to be put into effect and also the information that the trustees have to provide to the parties.

The valuation and splitting of a benefit can be postponed. This can be useful if a defined benefit or a partially vested accumulation interest is involved. A superannuation benefit may be subject to "caveat" to prevent it being paid out until the non-entitled spouse's interest is determined and paid. The starting point for splitting superannuation is an equal division of benefits accumulated during the relationship, but factors such as responsibilities for children under 18 and the preservation of farms may be taken into account.

A new interest can be created for the non-member spouse in funds regulated by Commonwealth superannuation laws, or the amount can be rolled over into a new fund. The amount will be preserved as if it had not been divided.

Couples can make binding superannuation agreements about how the superannuation will be divided if their relationship fails.

Disability benefit disputes

Disputes about total and permanent disability benefits are also common, since a determination of whether the member is disabled as defined by the trust deed must be made. Such benefits are often provided by way of an insurance policy between the trustee and an insurance company. So, a dispute can also arise as to whether the person is disabled as defined in the insurance contract.

Other disputes can arise as to whether a person is covered by insurance at a particular time, and by which insurance company. These occur because the trustee may from time to time change insurer. The question of when an incapacity occurs and which insurer is liable at that time can also arise.
The remainder of this chapter will concentrate on the review of decisions concerning total and permanent disability benefits, but the same principles apply to review of other decisions.

Structure of Disability Benefits

The definition of total and permanent disability varies from trust deed to trust deed. A common definition requires the member to have been absent from work due to disability for a period of at least six months and, in the opinion of the trustee, to be unlikely ever again to engage in any profession, trade or occupation for which the member is reasonably fitted by education, training or experience.

Work for which the member is "reasonably fitted by education, training or experience" means work for which the member is neither overqualified nor unqualified. For example, a roofing carpenter who was able to work as a clerk or watchman was regarded as totally and permanently disabled within this definition because such work was not suitable, given his carpentry qualification and experience.

Other common definitions require the member to be unlikely, in the trustee's opinion, ever to engage in the member's usual occupation (an easier test for the member to satisfy), or to engage in any gainful occupation (a more difficult test). "Any gainful occupation" means any occupation that the member is reasonably capable of undertaking, having regard to their education, experience or training, or that the member could reasonably be trained to perform. Therefore, a person who is physically capable of performing a clerical job but cannot read or write may be unable to engage in "any gainful occupation".

Insurance

As mentioned, trustees often, but not always, finance the provision of death and total and permanent disability benefits through a group life insurance policy. Where the trustee is a commercial organisation, the insurer is usually a related company.

Where the benefit is insurance-funded, the trust deed sometimes has the effect that the member is only entitled to the benefit if theinsurer pays the insured benefit to the trustee. But there are still two separate decisions to be made. The insurer must decide whether the member is entitled to the insured benefit, and the trustee must decide whether the member is entitled to a disability benefit.

The trustee must not simply allow the insurer to dictate what the trustee's decision is to be. If the trustee considers that the insurer should pay the benefit, the trustee may have a duty to press the insurer for payment.

Reviewing a Trustee's Decision

How trustees should make decisions

Trustees are required by law to make decisions solely with the interests of the beneficiaries in mind. They must exercise any powers and discretions under the trust deed in good faith, and for the purpose for which the powers were granted.

Trustees must also give real and genuine consideration to the exercise of their discretion. They must not simply rely on the opinion of another person, such as the opinion of the insurer or of the insurer's medical practitioner, for example.

Even where the trust deed gives the trustee the power to delegate the making of decisions, the decision has to be made within thedelegation given. It may be possible to argue, depending on the terms of the trust deed, that a decision has been improperly delegated.

A trustee will also fail to give a matter real and genuine consideration if the trustee asks itself the wrong question. One example would be a trustee refusing to pay a total and permanent disability benefit on the ground that the member could be retrained for a different job, when the definition required the trustee to ask itself whether the member was capable of carrying on their usual occupation. In some circumstances, there may be a duty to make further enquiries. Finch v Telstra Super Pty Ltd (2010) 242 CLR 254; (2010) 271 ALR 236; (2010) 84 ALJR 726; [2010] HCA 36.

However, there are many cases in which Judges have stated that trustees' decisions are not required to be correct, in accordance with the weight of the evidence, or even fair. Trustees are not required to give reasons for their decisions. However, if a trustee's conduct is sufficiently unreasonable or unfair, it may suggest that they are not acting in good faith.

Although trustees cannot be required to give reasons for their decisions, if they do so voluntarily the reasons must be sound. If they are not, a court may set aside the decision.

Trustees and insurers ought provide a claimant with information about material adverse to the claim and with an opportunity of addressing those matters before dismissing a claim. If this is not done, a court may set aside the decision: Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214.

Numerous observers have noted that these principles are inappropriate for determining rights to benefits provided in a commercial context, often as part of a contract of employment. It is unacceptable for members to be refused a payment when they are objectively disabled within the definition in the trust deed, because they are unable to show that the trustee's decision was made in bad faith (even though it is shown to be wrong, careless, or based on inadequate evidence).

Although no English or Australian court has yet held that the traditional principles do not apply to superannuation trusts, in practice, Australian courts appear to interpret them in a way favourable to beneficiaries where it is clear that the trustee's decision was not justified by the facts.

Internal review

The first step in challenging a trustee's decision concerning a benefit is to request reconsideration of the decision. Section 101 of the SISA requires regulated funds to ensure that enquiries or complaints made by beneficiaries are properly dealt with within 90 days. Before requesting reconsideration, it is a good idea to ask the trustee to provide:

  • a copy of the trust deed;
  • a copy of any relevant insurance policy;
  • an up-to-date statement of benefits;
  • reasons for its decision; and
  • copies of any documents it used in making its decision.

A member or other beneficiary is entitled to copies of the first three documents, according to both the law of trusts and the Superannuation Industry (Supervision) Regulations 1994 (Cth), but cannot force the trustee to provide the last two.

The next step is to write to the trustee requesting reconsideration, setting out the reasons why you believe the original decision is wrong. In the case of a total and permanent disability benefit, you should mention any factors that limit your employment prospects, including your age, extent of educational and vocational qualifications, and your experience and ability to speak and write English. You should include copies of any supportive medical reports. It would be prudent to obtain legal advice at this stage.

Review by the courts

If internal review is unsuccessful, the next step to consider is legal action. It is essential to obtain advice from a solicitor experienced in acting for members of superannuation funds before undertaking this step. Some firms of solicitors will act in these matters without payment until the matter is resolved. Nevertheless, substantial costs may be incurred and, if unsuccessful, a member may have to pay the legal costs of both parties to the dispute.

A court will only review a decision of a trustee on the basis of the principles set out in the section "How trustees should make decisions", above. This means that if the trustee has not voluntarily given reasons for its decision, you will have to show that the trustee failed to give the matter real and genuine consideration, acted in bad faith or acted for an improper purpose. If the trustee gave reasons for its decision, it will be set aside if the court accepts that the reasons were not sound.

Statements by trustees that "the medical evidence does not establish that you are disabled within the meaning of the trust deed", or that "in our opinion you are not disabled within the meaning of the trust deed" have been held to be reasons by the courts. However, a court will not set aside a trustee's decision simply because the Judge would have made a different decision. Even if the court does set aside the decision, it may not always substitute its own decision for that of the trustee. It may instead allow the trustee to make the decision again.

In practice, very few of these cases go as far as a court hearing. Almost all are settled by agreement before trial. An experienced solicitor can advise you on the likelihood of your case being settled.

Review in the Superannuation Complaints Tribunal

The SCT was set up under the Superannuation (Resolution of Complaints) Act 1993 (Cth) ("SRCA") to provide a forum for the speedy, informal and inexpensive resolution of complaints about regulated superannuation funds.

One significant advantage of the SCT is that legal costs cannot be awarded against the complainant; however, neither can thecomplainant recover legal costs from other parties to the dispute. The other main advantage is that the SCT can alter a decision that was not fair or reasonable. As mentioned above, a court has no power to set aside a decision by a trustee simply because it was unfair or unreasonable.

On the other hand, there is no right of oral advocacy to the SCT and no right of cross-examination. Some consider that a member may be better off choosing the court system as providing a greater likelihood of settlement and higher settlement amounts.

The SCT has power to resolve disputes with trustees whether that decision was made before or after the SRCA commenced on 1 July 1994, so long as the fund was a regulated fund. Since November 1995, the SCT has had the power to determine disputes about whether a person is disabled. However, there are the following restrictions on the disability claims which the Tribunal is able to consider:

  • the claim for disability benefit must be made to the superannuation fund within two years of the member permanently ceasing employment (a person on sick leave or in receipt of WorkCover payments may not have permanently ceased employment, although absent from work) (s14(6B));
  • the first decision of the trustee or insurer to refuse to pay the benefit must have been made on or after 1 November 1994; and
  • the complaint to the SCT must be made within two years of the first decision of the trustee or insurer to refuse to pay the benefit (s14(6A)).

Before the SCT can deal with a complaint, the beneficiary must have attempted to resolve it by making a complaint to the trustee (see: "Internal review", above). If the trustee has failed to resolve the matter satisfactorily within 90 days of the complaint being made, a complaint may be made to the SCT (s19).

The complaint must be in writing. A Registration of Complaints form may be obtained from the SCT (see: "Contacts" at the end of this chapter for further details).

The complaint must allege that the trustee's decision was unfair or unreasonable (s14(2)). "Fair" means just, unbiased, equitable, impartial, and "reasonable" means "within the limits of reason; not greatly less or more than might be thought appropriate": Pope v Lawler (1996) 41 ALD 127 (Nicholson J); National Mutual Life Association of Australia Ltd v Jevtovic [1997] FCA 359.

The SCT does not have the power to deal with complaints relating to the management of the fund as a whole (e.g. investment decisions) (s14(6)).

A beneficiary is not entitled to legal representation unless the SCT is satisfied that they require representation as a result of disability or for some other reason. The SCT will allow a solicitor to act for complainants who are unable to present their own cases effectively for any reason (including lack of fluency in written English or the complexity of the issues to be considered). However, it cannot prevent a solicitor preparing a submission on a party's behalf.

The SCT must attempt to resolve the complaint by conciliation. If this is unsuccessful, the SCT holds a "review meeting". Submissions to the review meeting are in writing unless the SCT orders oral submissions (s32). Prior to the review meeting, the SCT asks the complainant and the trustee to provide a written submission. Each submission is then sent to the other party, who is given an opportunity to reply in writing.

If, as a result of the review meeting, the SCT decides that the trustee's decision was not unfair or unreasonable in all the circumstances in relation to the complainant, it must affirm the decision. If the SCT does not decide that the decision was not unfair or unreasonable, it may substitute its own decision for that of the trustee.

The basis on which the SCT reviews decisions is more favourable to beneficiaries than review by the courts, because a tribunalcan look at the effect of the decision on the beneficiary. The courts, in contrast, can only look at the process by which the trustee made the decision. The SCT has frequently substituted its decision for that of the trustee in circumstances where the complainant may not have been successful in a court challenge.

The previous decisions of the SCT can be found on its website.

Reviewing an Insurer's Decision

Some funds provide insured benefits to members. Whether a member is entitled to the insured benefit depends both on the terms of the trust deed and on the terms of the insurance policy. The definition of "total and permanent disablement benefit" or "total disablement" (for income protection or salary continuance benefits) differs from fund to fund and policy to policy. It is vital to look at the definition in question. Often, a total disablement benefit is payable if a member is unable to do the member's own job from month to month, but a total and permanent disablement benefit is payable only if the insurer determines that the member is unlikely to return to employment. In these cases, the trustee has no power to determine whether a member is entitled to the insured total and permanent disability benefit.

If the insurer's decision is challenged in court, the court must decide whether the insurer, in deciding whether a member is entitled to a total and permanent disability benefit, has acted reasonably, in good faith, and with due regard for the interests of the member. If the insurer has so acted, the court cannot set aside the decision of the insurer even if it considers that, if the court were to make the decision, it would have found that the member was entitled to disability benefits.

On the other hand, if the insurance contract provides for benefits to be paid if the member is unlikely to return to employment (and not only if the insurer "considers" or "is satisfied" that the member is unlikely to return to employment) then the court can set aside the decision of the insurer if it considers that the member was entitled to disability benefits.

The trustee is under an obligation to consider whether an insurer that has rejected a claim has acted properly and, if it has not, to take action, including suing the insurer, if necessary, in order to protect the rights of the member. In practice, trustees rarely, if ever, sue insurers.

The member may sue the insurer on the ground that it has failed to act in good faith, reasonably and with due regard to the interests of the member or, if the insurance contract does not require the payment of benefits only if the insurer "considers" or "is satisfied" that benefits ought to be paid, on the simple ground that the member is disabled as defined in the insurance contract. The member can do this, even though not a party to the contract of insurance, because the trustee (which is a party) holds its rights under the contract on trust for the members. It is also necessary for the trustee to be party to the legal action. The trustee may agree to join the member in suing the insurer or, more usually, may be sued by the member for failing to act against the insurer to protect the member's rights.

Trustees and insurers ought provide a claimant with information about material adverse to the claim and with an opportunity of addressing those matters before dismissing a claim. If this is not done, a court may set aside the decision: Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214.

If the court decides the insurer breached its duty to act honestly and reasonably, it will usually not allow the insurer to make the decision again, but will substitute the court's decision.

Alternatively, the member can complain to the SCT about the insurer's decision. The SCT has the same powers to review the decisions of insurers concerning payment of disability benefits under superannuation trusts as it has to review the decisions of trustees. In particular, the SCT is not limited to looking at the process whereby the insurer made its decision, and can look at whether the decision was fair and reasonable. The restrictions in sections 14(6A) and 14(6B) of the SRCA (see: "Review in the Superannuation Complaints Tribunal", in "Reviewing a Trustee's Decision") apply to claims against insurers as well as to claims against trustees.

From 1 July 2008, the member may also complain about the decisions of life insurers to the Financial Ombudsman Service (FOS). FOS is an independent national dispute resolution service incorporating the Banking and Financial Services Ombudsman, the Financial Industry Complaints Service and the Insurance Ombudsman Service. FOS is free of charge for members of the public (see: "Contacts", below).

Contacts

Australian Taxation Office

Superannuation Hotline: 13 10 20

Web: www.ato.gov.au/super

Financial Ombudsman Service

GPO Box 3

Melbourne Vic 3001

Tel: 1300 780 808 Fax: 9613 6399

Email: info@fos.org.au

Web: www.fos.org.au

Superannuation Complaints Tribunal

Locked Bag 3060

GPO Melbourne 3001

Tel: 1300 884 114 Fax: 8635 5588

Email: info@sct.gov.au

Web: www.sct.gov.au

Centrelink

Tel: 13 23 00

Web: Early Release of Superannuation

Taxation

Acknowledgments

We would like to thank Daniel Smedley, Principal and Accredited Specialist in Tax Law, Harwood Andrews Lawyers, for contributing this chapter through the Fitzroy Law Handbook Online. A particular thanks to the Fitzroy Legal Service for permission to reproduce this chapter here.

Introduction

A number of taxes are imposed by the Federal and State Governments of Australia. This chapter aims to provide you with an understanding of the obligations imposed on taxpayers by Australia's tax system. It will be most useful to you if you are an individual taxpayer, as it focuses on the taxation of your personal income. However, the chapter will also provide some assistance to you if you are a small business taxpayer or a non-profit organisation. Limited information is included about the GST and certain other business taxes, as well as some income tax provisions from a business standpoint.

The principal sources of income tax law (collectively referred to in this chapter as "the Acts") are:

  • Income Tax Assessment Act 1936 (Cth) ("ITAA 1936");
  • Income Tax Assessment Act 1997 (Cth) ("ITAA 1997");
  • Taxation Administration Act 1953 (Cth) ("TAA 1953"); and
  • Income Tax Rates Act 1986 (Cth) ("ITRA 1986").

The ITAA 1997 represents a partial re-write of the ITAA 1936. There are also a number of other pieces of related legislation and statutory regulations.

Taxation law is a complex area and, even armed with this chapter and the taxation publications mentioned below (see: "Tax resources"), you may find it necessary to seek advice from the Australian Tax Office (ATO) or a taxation adviser. It must be remembered that this chapter can only provide the most general overview of Australian tax law and necessarily does not cover many of the complexities and contradictions in the law.

Note: Tax law is subject to frequent change. Therefore, while the information contained in this chapter is correct for the 2011/12 income year, unless otherwise noted, the information may not be correct if you apply it to other income years whether past or future.

Tax resources

The chapter focuses on managing the administrative aspects of your tax obligations, rather than what it takes to calculate your taxliability. You can obtain general information concerning the income tax system from ATO publications, including further information on how to calculate your tax liability. The ATO oversees most of Australia's Federal tax system and is headed by the Commissioner of Taxation (the Commissioner). It publishes an annual TaxPack, which you can rely upon in preparing your income tax returns.

TaxPack can be downloaded from the ATO website at www.ato.gov.au, or telephone the self-help publications ordering system on 1300 720 092 to request a copy (operator assisted 8 am–6 pm, Monday to Friday; automated 24 hours/7 days per week). Copies of TaxPack can also be collected from ATO shop fronts (addresses are listed on the ATO website) and some newsagents and post offices.

Alternatively, individuals can lodge their income tax returns online using the free e-tax service provided by the ATO.

The ATO also publishes a broad range of materials concerning the Australian tax system. These publications can generally be accessed from the main ATO website (see address above) and the ATO Legal Database at http://law.ato.gov.au. There is also a wide range of private sector publications, including the Master Tax Guides, published annually by CCH Australia Limited, and theAustralian Tax Handbook, published by Thomson Reuters.

How is Your Income Tax Liability Determined?

You are liable to pay tax on your taxable income earned over an income year. For the vast majority of taxpayers, the income year runs from 1 July to 30 June.

The elements of the process can be briefly described as follows:

ASSESSABLE INCOME (including net capital gains) Allowable deductions
=
TAXABLE INCOME x Applicable marginal tax rate
=
TAX ON TAXABLE INCOME Rebates and tax offsets
=
TAX PAYABLE + Medicare levy and surcharge + Higher education debt repayments + Flood levy (2011/12 only) Tax paid during the year
=
REFUND OR AMOUNT OWING

Assessable income is, as the name implies, the income on which tax may be assessed or levied. If you are an Australian resident for tax purposes, it will include income you have earned anywhere in the world. It will include "ordinary income", being amounts which courts have determined to be income, and "statutory income", being amounts that are specifically included in assessable income by the Acts. Some common types of assessable income include salary and wages, termination payments from your employment, dividends, interest and rent received, and net capital gains derived during the year.

Allowable deductions are usually amounts you spent to earn your assessable income other than amounts which are capital or private and domestic in nature. (For instance, clothing, child care and costs of getting to and from work are private and domestic expenses, and cannot be deducted.)

Marginal tax rate is the tax rate that applies to your level of taxable income. The greater the amount you earn the more tax you pay, not only because you have received more dollars, but because higher levels of income attract tax at higher rates.

Rebates or tax offsets are direct reductions in the tax you must pay. It includes dependants rebates, the Family Tax Benefit, childcare tax offset, private health insurance rebate, low income rebate, senior Australians tax offset, medical expenses rebate, and franking credits attached to dividends received.
Higher education debts includes the Higher Education Loan Program (HELP) or its predecessors such as the Higher Education Contribution Scheme (HECS).

Medicare levy is paid at a flat rate on your entire taxable income unless you are a low-income earner. There is also a Medicare levy surcharge applicable if your income exceeds a certain threshold and you do not have private health insurance.

Flood levy is a levy imposed on middle and higher income earning individuals for the 2011/12 tax year only. If you have less than $50,000 taxable income you will not be liable to pay the levy. Additionally, the levy is not imposed on certain individuals who were affected by a natural disaster between 1 July 2010 and 30 June 2011.

Tax paid during the year will primarily consist of amounts paid under the Pay-As-You-Go (PAYG) system, including amounts withheld from your salary and wages payments by your employer or instalments of tax you are required to pay during the year if you conduct your own business. You will receive a refund if you have paid more tax during the year than is required. You will have to pay further tax where your tax liability is greater than tax instalments already forwarded to the ATOon your behalf.

More information on each of these topics can be found in TaxPack or at the ATO's website.

Your Responsibilities as a Taxpayer

The need for professional advice

Most taxpayers operate on a system of self-assessment which means that, for the most part, you will be responsible for preparing your tax return and assessment of tax. As such, it will be your responsibility to maintain records in a particular way for a number of years. It is particularly important when you are claiming deductions, which are subject to strict substantiationrequirements, that you can establish that an item you claimed as a deduction did in fact exist and that the amount you claimed was the amount you actually incurred.

The policy of self-assessment means that the ATO initially accepts at face value the information in your tax return. Therefore, you determine whether an item is an allowable deduction or assessable income. However, you should remember that interest and penalties may be imposed if you make a wrong decision.

The ATO conducts both systematic and random audits to ensure that taxpayers comply with their responsibilities. The conduct of an audit may vary but, if you are subject to one, you will be asked to produce all necessary documentary evidence to establish that your taxation returns have been prepared in a true and correct manner.

TaxPack contains a guarantee from the ATO that, if you carefully and honestly follow TaxPack in the preparation of your return, you will not be charged a penalty should you make an honest mistake. Additionally, you can rely on the rights provided in theTaxpayer's Charter published by the ATO. It sets out your rights and obligations, as well as the ATO's service standards, dealing with various topics, including confidentiality, fair and reasonable treatment, and truthfulness. You can obtain a copy of theTaxpayer's Charter from the ATO on 1300 720 092 (local call), or from the ATO website.

The need for professional advice

As noted, taxation law is extremely lengthy and complex. This, plus your self-assessment responsibilities, means that it may be important for you to obtain professional taxation advice, particularly when completing a tax return. You may wish to consult a registered tax agent, although at times it may be appropriate to see a lawyer. You can obtain a tax deduction for amounts you spend in managing your tax affairs, including the preparation of your income tax returns by tax agents and the taxation advice you receive from tax agents and lawyers.

If you are a low-income earner you can use Tax Help, which is a free and confidential service provided by the ATO and is staffed by volunteers who can assist you in the preparation of your tax returns. For this assistance, ring the Individual Infoline on 13 28 61 (local call).

Tax File Numbers

As a taxpayer, you are required to have a tax file number (TFN). Apart from serving as a means of identification of individual taxpayers, the number also helps the ATO in its collection of tax from revenue that may otherwise escape the tax net.

If you are an employee, you are required to provide your employer with your TFN and, subject to some exceptions, you may choose to quote the TFN to investment bodies, such as banks, credit unions, building societies and companies issuing dividends. Unless an exemption applies, if you do not quote your TFN, tax will be deducted from interest and dividend payments at the highest marginal tax rate plus the Medicare levy under the PAYG system. The amount of tax deducted will reduce the amount of tax payable on your taxable income, but will not be refunded until an income tax return for the year is lodged.
Trustees of closely held trusts are required to lodge a TFN report by the end of the month following the quarter in which any new TFNs are notified to the trustees. In relation to year end distributions, TFN reports must be lodged by 31 July. Failure to report this information to the Commissioner is an offence and may result in a fine of up to $2,200 for a first offence.

If a beneficiary has not notified the trustee of their TFN either verbally or in writing before a 'payment' is made to them, including both a distribution of income of the trust or present entitlement, the trustee must withhold tax on that payment at a rate of 46.5%. The trustee will need to apply for PAYG withholding, and lodge an Annual TFN Withholding Report by 30 September. Withheld amounts must be paid to the ATO by 28 October. The beneficiary can then claim a credit in their income tax return for any amounts withheld.

The Tax Return

Do you have to file a tax return?

Generally, if your taxable income exceeds the minimum tax-free threshold you must lodge a tax return. If you are an Australian resident (but not a primary producer or, in some cases, under 18 years old) the threshold is currently $18,200 effective 1 July 2012. The availability of various rebates means that, even if you earn more than the threshold, you may not have to pay any tax, although you will have to lodge a tax return.

A low income tax offset (LITO) of up to $1,500 applies to individuals who earn an income of less than $66,667, although the offset amount is reduced for taxable income of more than $30,000. The offset in 2012/13 is $445. The LITO no longer applies to reduce tax payable by minors (persons under 18 years as at 30 June) on unearned income (for example: dividends, interest, rent and royalties).

For the 2011/12 tax year, if you were under 18 at the end of the tax year (30 June) and received income in a form other than salary or wages (for example: dividends, interest, rent and royalties), you do not have to lodge a tax return if your income was $416 or less. (Note: different rules apply to minors who received income as a result of an inheritance and in certain other circumstances).

If you are not a resident of Australia for tax purposes, you need to lodge returns if you derive income that is taxable in Australia, other than income from which withholding tax has been deducted.

In some cases you may need to lodge a tax return even where you have not reached a tax-free threshold. For example, you may work for only a short time but have had taxation instalments withheld from your pay. Even though you have earned less than the tax-free threshold, you will have to complete a tax return in order to receive a refund of the tax that has been withheld. Resident companies (except non-profit companies), partnerships, trusts and superannuation funds are required to file returns regardless of income. Non-profit companies (which include most clubs and associations) have to file a return if their taxable income exceeds $416.

More information on who is required to submit tax returns is contained in TaxPack and on the ATO website.

Which tax return do you file?

Individuals: In most cases, you will be required to complete an Income Tax Return Form for Individuals if you are:

  • a salary or wage earner;
  • a pensioner;
  • on unemployment benefits; or
  • self-employed.

TaxPack contains copies of return forms, as well as instructions and a general outline of the relevant tax provisions that assist you in preparing your forms.

If you are the legal personal representative of a deceased person (for example, the executor of the person's estate), you will need to complete a "date of death" return on behalf of the person for the period up to the date of their death. The form used for this is theTax Return for Individuals. You will then need to apply for a TFN for the estate and complete a Trust Tax Return on behalf of the estate for each income year until its administration has been completed. Further information on the responsibilities and liabilities of executors can be found in TaxPack, and also in the Guide to Capital Gains Tax and Partnership and Trust Tax Returns Instructions, available from the ATO website.

Businesses: Businesses also need to file annual tax returns. In addition, if you are carrying on a business, you will also need to complete a Business Activity Statement (BAS). The BAS is used for the majority of your tax obligations including your business income and your PAYG and Goods and Services Tax (GST) reporting requirements. While some businesses will be required to lodge their BAS on a quarterly or monthly basis, others will only need to lodge a BAS annually.

If you earn investment income or carry on a business but are not required to be registered for GST, you will need to complete anInstalment Activity Statement (IAS). Like the BAS, the IAS is used for reporting your tax obligations, such as company income tax, PAYG and Fringe Benefits Tax (FBT).
More information on your BAS and IAS obligations can be obtained from the Business Infoline on 13 28 66 or the ATO website.

Filing your tax return

It is most likely that your tax return will be due on 31 October each year. If you cannot meet this date, you should lodge an application for an extension of time with the ATO. This must be lodged before the due date and the application should state your reasons for requiring an extension.

Tax agents are allowed to spread their work over the bulk of the working year. As a result, one advantage of using a tax agent to lodge a return is that for many taxpayers the return will not have to be lodged until a date later than 31 October. This date will vary depending on the characteristics of the taxpayer. The ATO publishes details of its Lodgment Program each year, which can be located on the ATO website. However, when you use a tax agent for the first time you must complete a form provided by the tax agent, preferably prior to 30 November.

TaxPack indicates where you should lodge your returns. There are various regional Tax Offices and your postcode will determine to which of those offices you should send the form. See "Tax resources", above, for information about TaxPack.

Alternatively, you can lodge your return online using the ATO's e-tax software available from the ATO website. Refunds from returns lodged by e-tax can be expected within 14 days of lodgment. Taxpayers using e-tax will find their tax returns pre-filled by the ATO with various information, including salary and wages, interest, dividends, Centrelink payments and private health insurance details.

Once the ATO has completed your assessment, a notice setting out the details is issued and posted to you. If you are entitled to a refund, the notice will indicate this and either a cheque will be attached, or a bank account you have specified will be directly credited with the amount. Where you are required to pay additional tax this will be indicated on the notice, along with a date by which it must be paid.

Assessments

Once you lodge your return, the ATO makes an assessment of the amount of tax payable, based on the information you supplied in the return and on any other information in the ATO's possession. Such information may, for example, consist of computer lists of amounts you received as interest and dividends from banks, building societies and public companies, which the ATO compares with returns of individuals. Any failure to disclose is likely to be detected. The risk of detection has increased significantly due to the increased reliance by the ATO on computerisation of records. For instance, as noted above, taxpayers will find that their returns lodged by e-tax will be pre-filled by the ATO with information available to it.

The system of self-assessment is still not fully in place for individual taxpayers. That is, it is still the ATO which issues assessments (see: "Filing your tax return", above) based on information you provide. This contrasts with the position of companies, where no notice of assessment is issued. Instead, the tax legislation now deems an assessment of the appropriate amount of tax due to have been made either on the final date for payment of the tax or when the return was lodged, whichever is the later.

The ATO also possesses broad powers to obtain tax-related information, such as access to buildings, places, books, documents and other papers for the purposes of the Acts, as well as being able to require any person to furnish any such information as may be required.

If you do not lodge a tax return, the Commissioner has the power to issue an assessment based upon the Commissioner's judgment of your taxable income.

The Commissioner also has the power, subject to certain restrictions including time restrictions, to amend assessments previously made. Amendments of prior assessments are often made as a result of audits being conducted. In addition to any penalties that may be imposed in relation to any tax shortfall, an interest penalty will also be payable on the amount of the tax shortfall from the date tax became due and payable under the original assessment for the year in question.

Private Rulings and Oral Rulings

If you are unsure about the tax treatment of various past or future receipts or expenditure, you may apply to the ATO for a (written)private ruling or an oral ruling. You are entitled to rely upon the ruling and it binds the ATO to the opinion expressed.

When faced with an unfavourable private ruling, you should not simply ignore it and treat the receipt or expenditure differently to how it is treated in the ruling. To do so may expose you to penalties. You may appeal an unfavourable private ruling to the Administrative Appeals Tribunal (AAT) or the Federal Court.
Oral and private rulings are provided free of charge, but private rulings can take time to be issued by the ATO. Essentially, they provide a cheap alternative to advice from legal professionals. However, there are advantages and disadvantages to the binding nature of such rulings both on you and the ATO.

If you have simple tax affairs and you have a simple tax inquiry, you can apply to the Commissioner for an oral ruling, either in person at an ATO branch office or over the phone. If your inquiry is more complex, or you are dissatisfied with an oral ruling, you may apply for a (written) private ruling. An application form is available online from the ATO website.

Penalties, Interest Charges and Offences Relating to Tax Returns

If you have not complied with your tax obligations, you may become liable to penalties and interest charges. Some of the penalties for these offences can be extremely severe, particularly for deliberate evasion of tax. Penalties apply in addition to ordinary tax payable, rather than in substitution for tax. Therefore, you must be aware of your tax obligations and observe them.

The ATO may reduce or remit penalties and interest, depending on individual circumstances.

Two of the more common actions may be penalised as follows:

  • failing to lodge returns and other documents by the due date or in the approved form: for small entities (including most individuals), there is an ATO base penalty of 1 penalty unit (currently $110) for each 28-day period or part of a 28-day period (up to a maximum of five periods) during which the documents are not lodged; and
  • late payment of tax: the Shortfall Interest Charge (SIC) and the General Interest Charge (GIC) are uniform, tax-deductible charges. The SIC is payable where your tax assessment is amended to increase the amount of tax payable. It is 7.37%-8.00% per year for the 2011/12 financial year. The GIC is payable where you do not pay an amount of tax by the time it is due or where your assessment for a year prior to the 2004/05 income year is amended to increase the amount of tax payable. It is 11.37%–12.00% per year for the 2011/12 financial year. The GIC and SIC are each calculated daily on a compounding basis.

Tax shortfall provisions

Expressed simply, you will have a tax shortfall where, due to your own actions, you paid less tax than the ATO considers you should have paid. This may be due to a number of factors, including deliberate understatement of your income, carelessness, or where you contend that the Acts could be interpreted in a particular way favourable to you but cannot "reasonably argue" that your interpretation is acceptable.

 

The penalties imposed are fairly complex and are determined by a number of factors, including the degree of seriousness of the offence, whether you co-operated with the ATO, and whether you voluntarily disclosed the offence to the ATO.

The ATO has a fair amount of scope as to the penalty to be imposed within particular limits and may also remit penalties where it deems appropriate. Some of the terms used in the above have been the subject of discussion and interpretation as follows.

Recklessness

The Commissioner considers recklessness arises where there is a high degree of carelessness, including disregard of, or indifference to, risks that are foreseeable by a reasonable person.

Lack of Reasonable Care

The reasonable care test requires a taxpayer to take the same degree of care in fulfilling their tax obligations as could be expected of a reasonable ordinary person in their circumstances. Where you are regarded as having tried your best, no penalty should be imposed.

Reasonably arguable

A matter will be "reasonably arguable" if what is argued for is about as likely to be correct as incorrect, or is more likely to be correct than incorrect. Therefore, there must be a substantial prospect that your interpretation of the relevant provision would be upheld by a court. No penalty will be imposed for this offence unless the tax shortfall is greater than the higher of $10,000 or 1% of the tax payable on the basis of the return you lodged.

Specific penalty provisions also exist if you are involved in a tax avoidance scheme.

Promoter Penalties

Promotion of tax avoidance and tax evasion schemes is also prohibited. This activity can be penalised with civil penalties of up to $550,000 for an individual or $2.75 million for a body corporate, or more depending on the benefits received by the promoter and their associates.

Offences

In addition to the penalties listed above, a range of criminal offences may be imposed instead of the penalties referred to in the previous sections. Maximum penalties range from a fine of $2,200 to $11,000 and/or two years imprisonment for individuals. Fines may be up to five times higher in the case of companies and company officers may be personally liable for the tax offences of the company. Further, the court has the power to order a penalty of up to three times the amount of tax that was sought to be avoided.

 

Objections, Reviews and Appeals

As an individual, you generally have two years in which to lodge an objection with the ATO after receiving a notice of assessment if you are a taxpayer with simple tax affairs. If you have more complex tax affairs (for example, because you have capital gains or losses), you have four years in which to lodge an objection. This period may be extended in appropriate circumstances. The ATO may also allow you to lodge objections out of time.

In some situations, you will receive an amended assessment from the ATO. In these circumstances, you may object to the amended assessment by the later of:

  • two years (if your tax affairs are simple) or four years (in other cases) of the original assessment being served; or
  • 60 days after the ATO gives you a notice of amended assessment.

A notice of objection form is available on the ATO's website.

Your objection must adequately raise the disputed issues and the grounds you are relying on for claiming that the assessment is incorrect. Statements such as "it is incorrect" or "it is excessive" will not be sufficient without evidence to support them. Should your objection ultimately come before the AAT or a court, you may be limited to arguing the grounds of objection which were sent to the ATO. Therefore, it is most important that these grounds are clearly and comprehensively discussed. For this reason, it is often desirable to have your objection prepared by a professional tax adviser.

Once the objection is sent to the ATO, it will be considered by an officer who did not make the original decision. Where the ATO has not made a decision within 60 days of the objection being lodged, you may write to the ATO requiring a decision to be made. Generally, if no decision is made within a further 60 days, the objection is deemed to be disallowed. This will enable you to pursue other remedies without further delay.

Where the ATO rejects an objection, you have 60 days in which to either:

  • apply to the AAT for a review; or
  • appeal to the Federal Court.

The Federal Circuit Court also has jurisdiction to review some administrative decisions, such as those of the ATO.

An objection will generally be heard by the Taxation Appeals Division of the AAT. However, if the amount of tax being disputed is less than $5,000, you can elect to have your claim resolved in the Small Taxation Claims Tribunal (STCT). Applications made to the AAT may be transferred to the STCT from the Taxation Appeals Division. The STCT is part of the AAT but is cheaper and encourages resolution of disputes by mediation rather than more formal rulings.

There are fees and charges payable to courts and tribunals when you apply to have a decision of the ATO reviewed. Details of these fees and charges can be found at the website of the particular court or tribunal.

If your argument with the ATO is basically one of fact, it is probably preferable to have the matter heard by the AAT. Proceedings are relatively informal and the AAT is not bound by the strict rules of evidence which apply in courts. Further, if you are unsuccessful, you will generally not have to pay the ATO's legal costs, although you will have to pay your own legal costs. The AAT has wider power than a court to review the exercise of the ATO's discretions. Hearings are conducted in private, your identity will not be published and, if you wish, you may be represented by lawyers or others.

Where the matter involves a question of law, or is regarded as a test case, it may be preferable to have the matter heard by the Federal Court, despite the formality and cost. In test cases, the ATO may undertake to pay your costs, even if the ATO succeeds in the Federal Court.

It is possible for you or the ATO to lodge further appeals with the Full Court of the Federal Court, though such appeals will be restricted to questions of law. The final stage in the appeal process involves an appeal to the High Court, which may only occur if that court gives special leave to appeal.

Burden of proof

If you make an application, you must prove that the assessment is excessive. In other words, you will not be successful merely because the ATO cannot justify its assessment of your tax liability.

Ombudsman

If you are dissatisfied with administrative action taken by the ATO, you can complain, without charge, to the Commonwealth Ombudsman. The Ombudsman has a dedicated Specialist Adviser on Taxation heading a team of experts for investigation and resolution of taxpayers' disputes with the ATO.

Complaints need not be limited to technical legal matters but may also relate to the fairness and efficiency of ATO procedures and policies. It should be noted that the Ombudsman may be reluctant to become involved in matters which are more appropriately dealt with under the objections and appeals processes.

The Ombudsman can ultimately make recommendations that the ATO reconsider decisions, explain decisions further, pay compensation or change its procedures. While these recommendations are not binding on the ATO, the Ombudsman is able to publicise such findings and report them to the Commissioner of Taxation, the Treasurer, the Prime Minister or Parliament.

Complaints may be made in writing, by phone, in person or by using the online complaints form.

Taxation Ombudsman

GPO Box 442

Canberra ACT 2601

Tel: 1300 362 072 (local call cost; calls made from mobile phones charged at mobile phone rates)

SMS: 0413 266 662 (standard carrier rates apply)

Email: ombudsman@ombudsman.gov.au

Web: www.ombudsman.gov.au

If you require more information call the number above, or visit the Ombudsman's website.

Paying Your Tax

Generally, if you owe more tax than has been withheld from your income during a financial year, you must pay that tax by 1 December of the following financial year. You can pay your tax liability by cheque or money order, direct debit, BPay or at a post office (including by EFTPOS).

While an appeal is pending

The fact that an appeal is pending will not excuse you from meeting your taxation liability by the date specified on the notice of assessment. However, where you are disputing an assessment, the ATO will often agree not to take recovery action while the objection is being decided.

If your objection is disallowed and you exercise your appeal rights, provided there is a genuine dispute, the ATO may continue to defer recovery action provided you pay 50% of the amount in dispute. This amount is refundable, with interest, if you succeed. If you are not successful, the GIC applies to late payments.

If you receive a tax refund due to a successful objection, review or appeal, you will be entitled to interest on the amount of the refund for the period in which the tax was overpaid. Any interest received in this way will form a part of your assessable income, though the refunded tax does not.

Extension of time and repayment by instalments

The ATO may grant an extension of time (essentially, postponing actions to recover tax payable), though this would not normally exceed three months and will not go beyond 15 June in the tax year the assessment is issued. The ATO will need to be satisfied that valid reasons exist to justify the extension and you will also have to pay GIC.

Hence, when you request an extension of time, or permission to pay by instalments, you should prepare a statement which outlines:

  • your tax file number, the assessment number, the tax year, the amount of tax involved, and the due date for payment;
  • a brief statement of reasons for the application, including your financial position; and
  • a definite offer to pay by a specific date or by instalments beginning and ending on a specific date.

Ideally, you should make an application at least 10 days before the due date for payment but the ATO may extend this time. If you are seeking an extension for more than six months, you should supply the ATO with a statement of your assets and liabilities and other information. Because different parts of the ATO deal with objections and applications for time to pay, these two matters should be kept separate. You should write two letters, one for the objection and one for the time-to-pay application.
The ATO's discretion to remit further tax is now limited to situations where the inability to pay was caused by circumstances outside your control or where "special circumstances" exist. If further tax is to be remitted, some proof of your "innocence" will need to be shown in the application.

Relief from payment

In particular circumstances, the ATO may grant relief from tax liability either totally or partially, where it is of the opinion that the collection of the full amount would entail you suffering serious hardship. This might be because of any loss you have suffered, your financial circumstances, or your circumstances if you are a dependant of a deceased taxpayer.

You should make your application for relief to the ATO before the due date for payment, with details of your income, expenditure, assets and liabilities. It generally takes some time for the ATO to act, but in the interim the ATO should take no further legal steps to force payment.

Fringe Benefits Tax (FBT)

Fringe benefits are non-cash benefits provided by employers as a reward to employees or their associates. These benefits include providing interest-free loans, low-cost accommodation, motor vehicles for employees' private use, payment of golf-club membership fees, etc. It will also generally cover any "arrangement" which also involves a third party.

If you are an employer, you are liable to pay FBT if you provide employees with a fringe benefit. As with most areas involving tax, the operation of the FBT system contains several complexities and exceptions. However, you will most likely be required to pay FBT at a rate of 45%, plus the Medicare levy, on the value of the benefit provided. Because you pay the tax, the value of the benefit is not taxable in the hands of your employees, although the cost is often treated as part of the employee's remuneration package.

You can obtain more information on FBT through the ATO website or from the ATO's Business Infoline on 13 28 66.

Goods & Services Tax

The GST is a broad-based consumption tax which aims to tax "private final consumption expenditure". For the most part, it is simply added onto the price of goods and services and paid ultimately by their final consumers, i.e. the individuals who ultimately buy the final good or service. Businesses bear the responsibility for administering the tax and remitting amounts to the ATO.

The principal legislation in relation to GST is the A New Tax System (Goods and Services Tax) Act 1999 (Cth). More information on this and related Acts can be obtained from the ATO website (see: "Tax resources", above) or the Business Infoline on 13 28 66.

Mechanics of GST

The GST is imposed on taxable supplies. You will have made a taxable supply where:

  • you supplied goods, services, advice or information, including dealings with real property or rights;
  • you made the supply in return for some payment or other form of consideration;
  • you made the supply in the course of an enterprise you are carrying on;
  • the supply has some connection with Australia; and
  • you are registered or required to be registered for GST purposes.

The current rate of GST is 10%.

As mentioned, the GST taxes the final consumer of a good or service, not intermediate businesses. Therefore, if you are carrying on an enterprise, you will be entitled to be reimbursed for the GST you pay on your business inputs (such as trading stock). This reimbursement comes in the form of input tax credits. You must then charge GST on the goods and services you supply to your customers. You are liable to remit the amount of GST you charged to the ATO. Effectively, you are the collecting agent for the tax on behalf of the ATO.

If your GST liability exceeds your input tax credit entitlements, you need only pay the difference of these amounts to the ATO. On the other hand, you will be entitled to a refund from the ATO where your GST liability is less than your input tax credit entitlements.

Australian Business Number (ABN)

The ABN is intended to be the single identifier for businesses when dealing with government departments and agencies. It is also necessary for businesses to have an ABN in order to participate in the GST system.

You are entitled to an ABN if you are a company registered under the Corporations Act 2001 (Cth) or an entity carrying on an enterprise in Australia. This includes individuals running businesses, charities and religious institutions. You will not be entitled to an ABN as an employee, or if you are a hobbyist or conduct activities without reasonable expectation of profit.

You can apply for an ABN using a form available from the ATO, and from post offices and some bank branches. Alternatively, you can register online at www.abr.gov.au.

Registration for GST

To make a taxable supply, and to be reimbursed for GST you have paid on your business inputs, you will need to be registered for GST purposes. You must be registered if:

  • you are carrying on an enterprise (that is, you are not merely engaged in a hobby or are an employee of the enterprise); and
  • your annual turnover is $75,000 or more (or $150,000 if you are a non-profit organisation).

If your annual turnover is less than these amounts but you are carrying on an enterprise, you can choose whether to register for GST or not. You can register for GST on the same form as the application for an ABN (see: "Australian Business Number (ABN) ", above).

Where GST does not apply

There are two types of supplies that do not attract GST.

GST-free supplies: Examples of GST-free supplies include the supply of food, medical services, education, child care and exports. GST is not payable on GST-free supplies. However, suppliers will be entitled to an input tax credit for acquisitions relating to those supplies.

Input taxed supplies: The two broad categories of input taxed supplies are financial services and supplies of residential premises. Where a supply is input taxed, no GST is payable on it. This means that landlords do not charge GST on rent of private houses or apartments (although rent may increase because of the GST imposed on other costs relating to the premises). Where you acquire goods or services that relate to the provision of input taxed supplies, you are generally not entitled to input tax credits on those acquisitions.

State Duties and Taxes

Duties and taxes imposed by the Victorian Government are administered by the State Revenue Office (SRO). Many of these have been abolished as a result of the introduction of the GST. Further information on each can be obtained from the SRO on 13 21 61 or the website at www.sro.vic.gov.au.
Note: Payroll tax and other business taxes, and related expenses, are deductible from assessable income for income tax purposes, if you can establish a link between the expenses and your income-producing activities.

Payroll tax

Payroll tax is payable under the Payroll Tax Act 2008 (Tas). It is paid by employers on their employees' remuneration, whether in cash or otherwise, where the employer's total wage bill exceeds a threshold amount. Related employers may be "grouped" so that the total wage bill exceeds the threshold even if it does not on an individual basis. In certain cases, wages will be exempt from payroll tax (such as where the employee of a charity is engaged in charitable activities).

Stamp duty

The Duties Act 2001 (Tas) imposes duty on certain types of transactions. This Act remains a complex area of law and is not dealt with at length here.

Certain types of agreements cannot be enforced unless they are put into writing and stamp duty is paid. Although the rate of duty is often low, the total charge can be considerable.

The Tasmanian Government imposes stamp duty on the following types of transactions:

  • assignments and transfers of land;
  • insurance contracts;
  • declarations of trust over land;
  • transfer or assignment of trust interests;
  • some long term leases; and
  • applications for motor vehicle registration.

There are, however, a number of exemptions from stamp duty, such as where the transactions relate to a marriage breakdown and wills. Duty is no longer charged in Victoria on mortgages and transfers of shares in Victorian companies.

Land tax

Land tax is payable under the Land Tax Act 2000 (Tas) and is levied annually on the unimproved value of all land you own at 31 December in the year preceding the assessment year, other than your principal residence.

Tasmanian Government Assistance

General assistance – discounts and concessions

There are a variety of discounts and concessions available through Tasmanian government programs. The concessions website provides comprehensive coverage of these discounts and concessions by category and by concession card. These include:

  • Housing
  • Electricity and heating
  • Transport
  • Education
  • Health
  • Licences
  • Vehicles
  • Parks and heritage
  • Property, water and land tax

The concession cards are:

  • Health Care Card
  • Pensioner Concession Card
  • Veterans’ Affairs Pensioner Concession Card
  • Commonwealth Seniors Health Card
  • Tasmanian Seniors Card
  • Companion Card (for carers)

Included here are some general types of help available to pensioners and families. The assistance schemes may also be available to individuals, as government assistance is income assessed.

Contact the DHHS

For all services, gateway services, and information, it is best to contact the DHHS in person or submit an online query, or see the concessions website.

Phone: 1300 135 513

Mail: Department of Health and Human Services, GPO Box 125, HOBART, TAS, 7001.

Help for Families

The Department of Health and Human Services provides a range of services, support and financial assistance to Tasmanian young people, pensioners and families in need or in crisis.

Relatives Allowance Package

Relatives who have children in their permanent full-time care may be eligible for the Relatives Allowance Packakge if they meet the following criteria:

  • Have taken all possible action to obtain maintenance payments from the person or estate liable to support the child (a parent, or the estate of a deceased parent); and
  • Receive a Centrelink assistance payment such as carer payments and Family Tax Benefit.

These relatives may be eligible for the Relatives Allowance Package. The level of assistance is:

  • A fortnightly payment of $28
  • Two lump sum payments of $364 payable in May and November; and
  • A Christmas payment of $75 payable in December.
  • An annual clothing payment of $165 for children under 16 years of age payable in January

See the DHHS website for information on the Relatives Allowance Package

Establishment Allowance

The Establishment Allowance is a once off allowance to aid a carer-relative in setting up accommodation arrangements for the initial arrival and care of a child. It attaches to Relatives Allowance recipients, and is only paid once for the child to that carer.

Grandparents and relatives

Gateway Services across Tasmania provide additional support for grandparents and relatives who are caring for related children. Gateway services are contactable on 1800 171 233 or on the DHHS website.

Private Rental Support Service – rent and removals

Gateway services – Colony 47, and Anglicare are funded by Housing Tasmania to provide assistance with bonds, removal assistance and/or rent in advance or arrears. There are also ‘one off’ assistance packages available.

Eligibility for any of these services extends to those that fall within the Centrelink Health Care Card income threshold. Policy under the Affordable Housing Strategy also means that single people with an income of up to 20% more than the threshold limit may be eligible for assistance, and for families or couples with up to 10% above the threshold.

Family Violence Counselling and Support Service

The DHHS provides the Family Violence Counselling and Support Service (FVCSS) through therapeutic and counselling sessions for children, young adults, and parents. It is part of the Safe at Home Initiative, which is a whole of government initiative to minimise the harm arising from domestic violence, prevent domestic violence, and educate about domestic violence both with offenders and the community at large. The FVCSS provides both adult and children & young persons programs.

Disaster Welfare Plan

Under the State Disaster Welfare Plan, the Department has responsibility for coordinating personal services and relief financial assistance to disaster-affected persons. The maximum grant available for eligible persons is $7,300 over 6 months. There is also an Australian Government Disaster Recovery Payment, which provides one-of assistance to Australians adversely affected by a major disaster.

Currently available are Recovery and Restoration Grants, which are aimed at Tasmanians affected by the East Coast Busfires in 2006.

Help for Pensioners

The Internet

Learning about the internet is important for older members of the community. There are free access Online Access Centres throughout Tasmania. The access is available to pensioners and others. The State Library is one such Access Centre. Concessions on courses through Adult Education are also available.

Visual Aids

Assistance towards the cost of new lenses and basic frames, low vision aids, non-cosmetic contact lenses, prostheses and intra-ocular implants are available. The subsidies are 70 per cent of the cost. The assistance is available to eligible pensioners where a prescription has been issued by a participating optometrist. This service is potentially available for people at different stages of life, as it is an income based assessment. This includes pre-school age children, and adults post-school year 12 who have concession cards.

Transport

Discounts of 50 percent (to a maximum of $25 per single journey) are available to eligible concession holders, such as pensioners, where they have a permanent and severe disability and meet the eligibility for membership of the Transport Access Scheme.

When people holding a concession card purchase a bus ticket, both to travel within the city and in Tasmania at large, concessions are available that significantly discount the price of travel.

Funerals

In certain circumstances the Department of Health and Human Services may provide a basic funeral service, as health and safety requires. However, the Department will not provide the funeral expenses of a deceased person if there are known relatives who can ‘claim’ the deceased.

Heating Allowance

Payable to pensioners who meet the requirements of the Pensioner (Heating Allowance) Act 1971 (Tas). More information is available at on the DHHS website.

Social Security

Acknowledgments

We would like to thank Michael Freedman and Rehana Chowdry, Senior Solicitors, Victorian Legal Aid, for contributing this chapter through the Fitzroy Law Handbook Online. A particular thanks to the Fitzroy Legal Service for permission to reproduce this chapter here.

Note: Rates of pensions and allowances change regularly. Always check current rates with Centrelink.
On 1 July 2011, Centrelink and Medicare Australia were abolished as statutory authorities and integrated into the Department of Human Services. For ease of reference, this chapter will continue to refer to Centrelink).

WARNING

Please refer to Centrelink for the most up to date information. No information on this website is legal advice nor can we guarantee that it is the most recent information. 

For any and all enquiries in relation to social security please call or visit a Centrelink office.

Pensions

Unless otherwise stated, the section numbers in this chapter refer to the Social Security Act 1991 (Cth) ("SSA").

Social security law is also found in the:

Age Pension

Eligibility (ss72343)

To be eligible for the Age Pension, a person must have reached pension age according to gender and date of birth (see: ss23(5A), (5B), (5C) & (5D)) for more details).

To be eligible a person must also be an "Australian resident" (in effect, having permanent residency or Australian citizenship, as well as establishing and maintaining ties with Australia) and in Australia when claiming the pension, unless claiming under an international agreement.

In addition, the person must have been an "Australian resident" for at least 10 years continuously at some time prior to claim, or 10 years in total with one period of at least five years continuous Australian residence. A person may be exempt from this if they arrived as a refugee or under a special program.

A person may be treated as residing in Australia even during extensive periods overseas. However, people can return to Australia after extensive periods and be found not to have Australian residence.

Residency requirements may also be modified by agreements with other countries (see: "International agreements", below). This is a complex area and any specific queries should be taken to a community legal centre, Tasmanian Legal Aid or a private solicitor. For specific information regarding Age Pension eligibility, contact Centrelink.

Rate of Pension (ss5510641065)

There are two basic rates of pension - one rate for single pensioners and another rate for partnered pensioners. Rates are adjusted every six months and may be reduced if the pensioner (or partner) has income or assets that bring them under the pension income or assets test, unless permanently blind (see: "Income and assets tests for pensions", below).

A pensioner may also be eligible for Rent Assistance (see: "Rent Assistance", below) and other supplements that increase the pension above the standard rate.

Pension Bonus Scheme

Eligibility (s92C)

The pension bonus scheme is closed to new entrants who did not qualify for Age Pension before 20 September 2009 (s92J). In its place is the Work Bonus Scheme (see "Rate of Pension").

Disability Support Pension

Eligibility (ss79495)
To be eligible for the Disability Support Pension, the person must be 16 or over and must:

  • be permanently blind (s95(1)(a)); or
  • have a permanent physical, intellectual or psychiatric impairment rated at 20 points or more under the Impairment Tables (in Schedule 1B of the SSA), and have a "continuing inability to work" (s94(2)).

To be eligible a person must be an "Australian resident" and be in Australia when claiming the pension, unless claiming under an international agreement. However a person can be absent from Australia if they are a terminally ill disability support pensioner (section 1218AA (1) (a) – (e)).There is no "qualifying residence" requirement if the person is an Australian resident when they become permanently blind or began to have a continuing inability to work, or if they are a dependent child of an Australian resident when one of these events occurs. If the blindness or impairment and inability to work occurred before the person became an Australian resident, or during a period of non-residence, they must have either 10 years qualifying residence or a qualifying residence exemption.

The Impairment Tables measure the functional effects of any "permanent" medical condition. The tables changed on 1 January 2012, and the previous Tables will apply to applications lodged before that date. Once a condition has been "fully diagnosed, treated and stabilised", it is accepted as permanent if it is likely to persist for at least two years. Impairment ratings are allocated following a Job Capacity Assessment arranged by Centrelink.

A person is permanently blind if they are totally unsighted or so severely unsighted that the effect of the disability on day-to-day living is essentially the same as the effect of total lack of sight. A person's loss of sight is measured on the basis of their corrected vision. A person who is permanently blind qualifies for Disability Support Pension without having to satisfy the "continuing inability to work" requirement.

A continuing inability to work means an inability to do any work or training activity for at least two years; or if they can undertake a training activity it won't equip the person for such work within two years. "Work" is defined as work that is at least for 15 hours a week (since 1 July 2006) at award wages or above, being work that exists in Australia.

If the person does not have at least one impairment rated at 20 points under the impairment Tables, they must also have "actively participated in a program of support" to be considered to have a Continuing Ability to Work. A "program of support" is designed to assist persons to find, prepare for and maintain work, and is generally Commonwealth-funded. There are guidelines in place to assist Centrelink in determining whether a person has actively participated in such a program.

Rate of Pension (ss117106410651066A1066B)

Apart from single pensioners aged under 21 with no children, the basic rates of Disability Support Pension are to the same as for Age Pension. The rate of pension payable to those under 21 depends on the person's age and living arrangements.

A pensioner may also be eligible for Rent Assistance and other supplements that increase the pension above the standard rate.

Disability Support Pension rates are subject to the pension income or assets test, unless the pensioner is permanently blind (see: "Income and assets tests for pensions", below).

Carer Payment

Eligibility (ss7197-198)

A person may be paid a Carer Payment if they provide constant care, including supervision, in the carer's own home to:

  • a disabled adult (s198);
  • a disabled adult and a dependent child (s198);
  • a child with a "severe disability" or a "severe medical condition" (s197B);
  • two or more children with a disability or medical condition (s197C);
  • a disabled adult and one or more children each with a disability or medical condition (s197D);
  • a child who has a terminal condition (s197E);
  • a child with a severe disability or severe medical condition on a short-term or episodic basis (s197G); or
  • a "profoundly disabled child", or two or more "disabled children" (pre-1 July 2009 saved cases).

A person may also be paid a Carer Payment if they exchange care, under a parenting plan, of two or more children each with a disability or medical condition (s197F).

Carer Payment claims in respect of children with disabilities or medical conditions are assessed against the "Disability Care Load Assessment (Child) Determination", which requires an assessment by a "treating health professional", such as the child’s doctor, registered nurse or registered psychologist.

To receive a Carer Payment to care for a disabled adult the adult must be assessed under the Adult Disability Assessment Tool (ADAT), on the basis of the responses provided in the treating health professional report. This report may be completed by a doctor, nurse, occupational therapist or an Aged Care Assessment Service.

A person cannot receive Carer Payment as well as another income support payment. However, the person may be entitled to other payments such as Carer Allowance or Family Tax Benefit. A person who receives a Carer Payment for a child should also be entitled to Carer Allowance.

The person being cared for must meet the care receiver income and asset test. There is no obligation to live with the cared for person, only to provide constant care. A person receiving carer payment is entitled to receive payment for up to 63 days per year while taking respite from care.

Rate of Payment (ss2101064)

The basic rates of Carer Payment are to the same as for the Age Pension. The rate of the Carer Payment is subject to the pension income test or assets (see: "Income and assets tests for pensions", below).

A pensioner may also be eligible for Rent Assistance and other supplements that increase the pension above the standard rate.

Income and assets tests for pensions

The rates of each of the above pensions are subject to either the income test or the assets test, unless the pensioner is permanently blind. Where a person has both income and assets, the test that produces the lower payment applies.

Income Test (ss8106410651066A1066BPart 3.10)

The income test allows a pensioner to earn income to a point before the level of pension is reduced. The level depends on the person's marital status. For each $1 of income in excess of the set level, the weekly pension is reduced by 50 cents (single pensioner) or 25 cents each (partnered pensioner).

Employment income is subject to a Work Bonus for pensioners over Age Pension age. The Work Bonus was introduced from 20 September 2009 to replace the Pension Bonus Scheme. The first $250 of income in a fortnight is disregarded from the income test. Also if a person does not earn money in a fortnight they may accrue the $250 to count alongside future earnings. A person can accrue up to $6,500. This is in addition to the normal allowable income threshold.

A permanently blind person can receive the Age or Disability Support Pension, regardless of income (s1065).

The income of a partnered pensioner is equal to half the combined income of the person and their partner.

Income is defined very broadly in the SSA. It is different to the definition for income tax law. It includes amounts that are "earned, derived or received for the person's own use" and periodical payments or benefits by way of gifts or allowances. "Income amount" means valuable consideration, personal earnings, moneys or profits (whether of a capital nature or not) (s8). Among other things, income includes bank interest, regular superannuation payments and rent paid by tenants. (For workers compensation payments,see: "Compensation and damages payments", below.)

Several types of income are not assessed under the income test, for example:

  • loans that a person receives;
  • payments under the SSA;
  • emergency relief;
  • insurance payments for loss of property; and
  • refunds from Medicare or health insurance funds.

A complete list of exempt income appears in section 8(8) of the SSA.

Income is defined as gross income without any reduction (s1072) except where a person carries on a business when expenses involved in gaining that income may be deducted (ss1074 & 1075). 

Offsetting a loss from one source against other income is not permitted.

Income from "financial investments" (s9), unless exempt by the Minister (s1084), is assessed in the following way (Part 3.10):

  • the value of all the person's investments are added together;
  • investments under the threshold are deemed to earn 3% interest; and
  • the amount over the threshold is deemed to earn 4.5%.

Note: The deeming rates and thresholds change periodically. Check with Centrelink for current rates.

This is a complex area and any specific queries should be taken to a community legal centre, Tasmania Legal Aid or a solicitor.

Assets Test (s11Part 3.12)

A pension is reduced under the assets test if the total net value of the person's property or assets (apart from their home) exceeds the relevant limit, which changes annually.

For each $1,000 of assets in excess of the limit, the fortnightly pension is reduced by $1.50 per fortnight (single and couple combined).

A permanently blind person will continue to receive Age or Disability Support Pension, regardless of assets.

The value of a person's assets is the current market value, the amount the assets could be sold for less any debts owed on the assets, and is not the replacement value or the original cost.

There are many things excluded from the asset test including the "principal" home (as long as the person is living in it), and surrounding land of up to two hectares , special aids for disabled people, and pre-paid funeral expenses. A list of the assets exempt from the asset test appears in section 1118.

The value of an asset may be excluded under the "hardship provisions", if the pensioner cannot sell or realise the asset or use it as security for borrowing (or if it would be unreasonable to expect the pensioner to sell, realise or use the asset as security) and if the pensioner would suffer severe financial hardship. For the hardship provisions to apply, a person must make a specific claim to Centrelink, consideration is not automatic.

If the hardship provisions apply, the level of pension might be reduced by the income which could be earned from the pensioner's use of the asset (ss11291130). This means that the value of the asset may still affect the rate of pension payable.

A person of age pension age who qualifies for Carer Payment or Age Pension or is the partner of such a person, may also be eligible for consideration under the "extended land use test". They have to have a 20-year continuous attachment to the land and principal home. They also have to be making "effective use of the land", meaning that if the land or part of it is productive, it is being used to generate an income. If successful, all land held on the same title as the principal home, or deemed to be on one title, is exempt from the assets test.

Allowances and Payments

Youth Allowance and Austudy

Youth Allowance

Eligibility (ss7540)

Youth Allowance is generally for people aged 16-24 who satisfy the activity test or people temporarily incapacitated for full-time study aged 21-24. People over 25 may be eligible if they were receiving Youth Allowance as an Australian Apprentice or student before they turned 25 and continue in that course or apprenticeship. A person who is 15 may also be eligible for Youth Allowance if they are independent. Exemptions from the full-time study requirement apply (see below).

The person must be an Australian resident (or exempt resident) and in Australia to receive Youth Allowance.

The activity test is satisfied if the applicant:

  • is undertaking full-time study;
  • is undertaking approved full-time training;
  • is seeking and willing to undertake paid work (if they are not an early school leaver);
  • is a carer of a child and the applicant meets the Secretary's requirements;
  • is complying with an Employment Pathway Plan, and is either:
  • an early school leaver;
  • in a class of persons specified by Centrelink; or
  • is determined by Centrelink to be taken to satisfy the activity test.

if the person complies with a Centrelink notice to do paid work, participate in a program of work or participate in a training program.

A person under 21 years old who does not have a Year 12 or equivalent qualification will usually need to participate in education or full-time training, or participate full-time (25 hours a week) in part-time study or training, in combination with other approved activities. If a person under 21 has a partial capacity to work, they may also be eligible for a Youth Disability Supplement.

Payment of Youth Allowance is subject to waiting periods similar to those for Newstart Allowance (see: "Waiting periods" under "Newstart Allowance", below). Failure to comply with the activity test or Youth Allowance Employment Pathway Plan may result in a penalty being imposed. The penalties are the same as for Newstart Allowance (see below).

Under 18-year-olds (s543A)

Sixteen- and seventeen-year-olds who do not have the equivalent of Year 12 education normally have to undertake full-time education or training to receive Youth Allowance. However, they may be exempted for the following reasons:

  • illness or being within six weeks of pregnancy;
  • homelessness;
  • in a state of personal crisis, or is a refugee (in some circumstances);
  • part-time work and/or education of at least 20 hours per week;
  • losing a job;
  • disability or learning difficulties;
  • inability to obtain an education place;
  • a drug problem; or
  • inability to undertake full-time study.

For the purposes of determining the correct rate and the application of parental means testing, a young person is classified as: dependent at home; dependent and required to live away from home; or independent.

Required to live away from home

A young person (that is, someone aged from 18 to under 25) is classified as required to live away from home (s1067D) if they:

  • are not independent;
  • do not live at the home of a parent; and
  • need to live away from home for education, training or employment, or their prospects are significantly increased if they live away from home.

Independent

A young person is independent (s1067A) if they:

  • are an orphan;
  • are a refugee not wholly or substantially dependent on someone else and without a parent living in Australia;
  • are self-supporting due to an employment history as defined in the legislation;
  • have an employment history as defined in the legislation, are unsupported, and are disadvantaged in relation to employment or education;
  • are a member of a couple;
  • have a dependent child;
  • have parents who cannot exercise their responsibilities;
  • are in state care; or
  • cannot live at home, due to extreme family breakdown, serious risk to physical or mental well-being due to violence, sexual abuse or other unreasonable circumstances, lack of stable accommodation; and are not receiving continuous support, whether financial or other, from a parent, guardian, or the state.

Rate of Allowance (Part 3.5)

Youth Allowance is paid subject to:

  • the parental and personal means test (unless the person is independent); or
  • the personal means test (if the person is independent and single); or
  • the partner and personal means test (if the person is independent and a member of a couple).

The parental means test applies to dependent young persons, including those required to live away from home. From 1 July 2012 the rate reduces by 20 cents for every $1 the parent's income exceeds $46,355. There is also an asset test and family actual means test. The test which produces the lowest payment is applied.

Under the personal income test, Youth Allowance for full-time students is reduced as income increases. However the first $7,223 of a merit and equity based scholarship is exempt. A job seeker can earn $143 per fortnight and a student or Australian apprentice $400 per fortnight without affecting the rate.  The rate of reduction after that changes frequently, contact Centrelink for specific rates.

Youth Allowance is not payable if the assets value (parental or partner plus personal) exceeds the amounts set out in section 547C. These limits increase twice a year.

Most students in receipt of Youth Allowance will also receive the Student Start-Up Scholarship, worth $1,300 per year. Some may be paid a fares allowance.

Austudy

Eligibility (ss7568)
To be eligible for Austudy, a person must satisfy an Activity Test, be over 25 (unless receiving Youth Allowance immediately before turning 25), and be an Australian resident. Waiting periods may apply, including a preclusion period for seasonal workers.

The Activity Test requires the person to be undertaking qualifying study (this may require a full-time, or in some circumstances, concessional study load) in an approved course, and satisfy progress rules. A person cannot satisfy the Activity Test if they are a new apprentice or have completed doctoral study.

A person commits an Austudy participation failure by failing without reasonable excuse to comply with certain Centrelink requirements, or to satisfy the Activity Test. If the person commits a failure in the same payment period as a previous failure, the failure is not considered a participation failure if it is the person's first payment period. If the failure is committed during a subsequent period, it is not considered a participation failure if another failure was not committed in the immediately preceding payment period, or the person had acted in accordance with a Centrelink requirement in respect of the failure.

Following an Austudy participation failure, or failure to comply with a requirement in respect of the failure, Austudy is not payable until the person undertakes an activity required by, or complies with a direction of, Centrelink in respect of the failure. An eight-week non-payment period applies following repeated participation failures, although Centrelink have discretion not to apply the non-payment period.

Austudy is also not payable while the person is subject to a "multiple entitlement exclusion". This applies if the person becomes entitled to another payment or scheme referred to in section 578A while receiving Austudy, or is subject to an Assurance of Support. Austudy is also not payable to CDEP Scheme participants or armed service widow(er)s who receive a lump sum or weekly payments under section 234(1)(b) of the Military Rehabilitation and Compensation Act 2004 (Cth).

Rate of Allowance (ss5811067L)

The rate of Austudy varies according to whether the recipient:

  • is single;
  • is a member of a couple; or
  • has dependent children.

In addition, a special rate is available for long-term income support recipients commencing full-time study or an Australian Apprenticeship.

Newstart Allowance

Eligibility (ss7593596613)

To be eligible for Newstart Allowance, a person must be at least 21 and below age pension age. The person must:

  • be unemployed (primarily concerned with finding full-time work, and not significantly engaged in setting up a business or some activity that interferes with their ability to look for, or take up, employment, e.g. study, voluntary work, housework, establishing a farm);
  • be an Australian resident and in Australia;
  • satisfy the "activity test" (or not be required to do so);
  • be prepared to enter into an Employment Pathway Plan, and comply with an Agreement in force;
  • not be involved in industrial action involving the person or their trade union;
  • not reduce their job prospects by moving to an area of lower employment prospects; and
  • not be enrolled as a full-time student.

The activity test is set out in section 601. The person must show that they are actively seeking and willing to undertake suitable paid work; and that they are complying with any directions from Centrelink or their Job Network Provider to undertake paid work or training. There are exemptions to the activity test (ss602C to 603F). These include:

  • over 55 and engaged in at least 30 hours a week of approved unpaid voluntary work, or a combination of such work and part-time paid employment;
  • attending a training camp for the Armed Forces Reserve (or similar);
  • covered by a general special circumstances exemption, such as homelessness, major personal crisis, major disruption to their home, temporary caring responsibilities, newly-arrived refugees, etc;
  • unfit for more than eight hours work due to temporary illness or injury, and unable to undertake another suitable activity;
  • covered by an automatic 12-month maximum special family circumstances exemption, such as foster caring, home schooling, and caring for four or more children; or
  • covered by special circumstances such as caring for a dependent child with a disability, being subject to domestic violence, extremely high stress due to recent relationship breakdown, the death of an immediate family member and caring responsibilities.

Increasingly, activity test requirements are being modified, rather than a complete exemption being allowed. In addition, peopledeemed to have a "partial capacity to work" (s16B) will be required to look for work of up to 25 hours per week, but will be deemed to fully meet the activity test if they undertake 15 hours work per week. This decision will be made following a Job Capacity Assessment (see: "Disability Support Pension", above in "Pensions").

Employment Pathway Plans

Employment Pathway Plans are written agreements "negotiated" between Centrelink and a recipient of activity-tested payments, in this case Newstart Allowance. They are negotiated with a Job Network Provider, but must be approved by Centrelink.

Employment Pathway Plans require the person to do things to improve their chances of obtaining employment. These include job training, paid work experience, unpaid voluntary work and applying for a certain number of jobs in a period. Newstart Allowance is usually not payable until a person signs an Employment Pathway Plan, and a participation failure may result if a person unreasonably fails to comply with the terms of the Employment Pathway Plan (see below).

Waiting Periods

Generally, a person must wait seven days from the date of claim before becoming eligible for Newstart Allowance, unless the person transfers from another income support payment within 13 weeks. The waiting period may be reduced or waived because of financial hardship.

In addition, where the person has liquid assets of more than $3,000 (single) or $6,000 (member of a couple, or with dependent children), they must serve a waiting period of up to 13 weeks, depending on the amount.

Migrants who entered Australia or became permanent residents after 4 March 1997 must serve a waiting period of 104 weeks, although Special Benefit may be available in some circumstances.

There are also waiting periods for people who get payouts of sick leave, annual leave, long service leave or maternity leave, or have done seasonal work earning more than "average weekly ordinary time earnings" in the six months prior to claim.

Participation Payment Failures

Participation Failures are set out in Division 3A of the SS (Administration) Act. The regime applies to Participation Payments (generally NewStart Allowance, but for some people Youth Allowance, Parenting Payment and Special Benefit).

There are now four possible types of failure:

Centrelink can also impose an unemployment non-payment period.

"No show no pay" failures

A person commits a no show no pay failure if they:

  • fail to do something required by an Employment Pathway Plan, or commit misconduct while participating;
  • fail to comply with a serious failure requirement, or commit misconduct while complying; or
  • intentionally act in a way that could have the reasonable foreseeable result of a job offer not being made.

It is only possible to commit one no show no pay failure per day. The penalty for a failure is the loss of one-tenth of the person's fortnightly payment. A failure only applies if the person has no reasonable excuse (unless the person commits misconduct), although rules as to what constitutes an "reasonable excuse" have been tightened - see: s42(UA).

Connection failures

A person commits a connection failure if (without reasonable excuse) they:

  • fail to attend an appointment required by Centrelink notice or Employment Pathway Plan, or enter into an Employment Pathway Plan;
  • failure to meet a job search requirement or comply with an Employment Pathway Plan requirement; or
  • fail to keep or return a job seeker diary.

If a connection failure is committed, the person may be required to comply with a reconnection requirement (essentially an opportunity to fix the failure).

Reconnection failure

A person commits a reconnection failure if they fail to comply with a reconnection requirement without reasonable excuse.

The penalty for a reconnection failure is loss of one-tenth of the person's fortnightly payment for each business day until the failure is fixed. Further reconnection requirements may be imposed even if the person had a reasonable excuse for committing an earlier reconnection failure.

Serious failure

A serious failure is committed if a person, without reasonable excuse, persistently fails to comply with his or her obligations, in relation to a participation payment. An eight-week non-payment period applies if a serious failure is committed.

Centrelink may require the person who has committed a serious failure to comply with a serious failure requirement. If the person begins to comply, Centrelink may end the non-payment period.

If Centrelink determines that the person would be in severe financial hardship if required to serve the non-payment period, the non-payment period can be ended early.

Comprehensive Compliance Assessment

Before determining that a person has committed a serious failure due to persistent non-compliance, Centrelink must conduct a Comprehensive Compliance Assessment to ascertain why the person has committed failures or failed to meet Centrelink requirements, whether the person has employment barriers, and whether the participation requirements are appropriate.

Three failures in any six-month period will trigger an Assessment. At an Assessment, a Centrelink officer will, among other things, consider whether the person would benefit from any additional assistance. Failure to attend an Assessment may result in a connection failure.

Unemployment non-payment period

If a person is unemployed due to misconduct, or an unreasonable voluntary act, an eight-week non-payment period applies. This can be ended early if the person is in severe financial hardship, and is in a specified class of persons (e.g. has an impairment, is homeless, or has a dependent child).

Other Penalties and non-payment periods

Centrelink may impose a deferment period on a seasonal worker who is "between jobs" (s633). The length of the period will depend on how long the person worked and how much they earned.

A deferment of 26 weeks may be imposed if a person reduces their own employment prospects by moving to a new place of residence without sufficient reason. There is only "sufficient reason" when the person has moved to join a family member, for treatment of illness, to undertake approved rehabilitation or training, or for an "extreme circumstance" (e.g. domestic violence) (s634).

Rate of Allowance (ss643, 1068)

The rate of Newstart Allowance varies according to whether the recipient:

  • is single;
  • is a member of a couple;
  • has dependent children; or
  • is aged over 60.

Work for the Dole participants may be eligible for an additional $20.80 per fortnight.

A person on Newstart Allowance may also be eligible for Rent Assistance (see: "Rent assistance").

The rates are reduced if the recipient (or their partner) has income that brings the recipient above the income threshold. There is also an assets test for Newstart Allowance. (See: "Income and assets tests for Sickness, Youth, Newstart and Parenting Payment (Partnered)".)

Sickness and Mobility Allowances

Sickness Allowance

Eligibility (ss7666)

To be eligible for Sickness Allowance, a person must be aged between 21 and age pension age, and must be an Australian resident.

The person must be temporarily incapacitated for work (or study, if receiving Austudy or Abstudy) and in Australia throughout the period. That incapacity must be caused wholly by a medical condition arising from sickness or an accident. Immediately before the incapacity, the person must have been in employment, and when the incapacity ends must be able to return to their job.

Incapacity for work is judged by assessing the extent to which a person's medical condition limits their ability to engage in paid work. Sickness Allowance is also payable to recipients of Austudy or Abstudy who are temporarily incapacitated but still committed to resuming full-time study.
A person who claims Sickness Allowance within five weeks of becoming incapacitated for work may be paid from the date of incapacity.

Rate of Allowance (ss7091068)

The rate of the Allowance varies according to the age of the person. The rates are the same as for Newstart Allowance. (Also see: "Income and assets tests for Sickness, Youth, Newstart and Parenting Payment (Partnered)", below.)

Mobility Allowance (MOB)

This allowance is available to people with a disability aged 16 years or over who cannot use public transport without substantial assistance and who are required to travel to work, volunteering or training etc.

Family, Partner and Parenting Allowances

Partner Allowance (benefit)

Note: There have been no new claims of Partner Allowance since 20 September 2003.

Eligibility (s771HA)

The partner of a person receiving a benefit may also receive a Partner Allowance. The same eligibility requirements apply as for Partner Allowance (pension).

Parenting Payment

Eligibility (ss7500)

A Parenting Payment (PP) is paid to a "principal parent" who has at least one "Parenting Payment child".

Parenting Payment (partnered) (PP (partnered)) is paid to a member of a couple where the child is under six years old, and Parenting Payment (single) (PP (single)) is paid to a single person where the child is under eight years old. The person must be an Australian resident and in Australia at the date of claim.

If a person was receiving a Parenting Payment before 1 July 2006 and has been continuously eligible for PP since this date, or does not cease to be eligible for more than 12 weeks, they may receive this payment until their youngest child turns 16, but will have participation requirements from the time the child is seven years old.

However, this only applies with respect to children in the person’s care immediately before 1 July 2011.

A recipient of the PP may have "participation requirements". Penalties for non-compliance apply (see: "Newstart Allowance").

The rates of payment and income and assets tests are different for PP (partnered) and PP (single) (see below).

A "principal parent" is a person with the care of at least one dependent child, i.e.:

  • a natural or adopted child or young person, in the adult's care, and the adult is legally responsible for the young person's day-to-day care, welfare and development; or
  • not the dependant of someone else, and wholly or substantially in the adult's care.

The child can be the PP child of only one person at a time.

Members of a couple, both those legally married and not living separately and apart on a permanent or indefinite basis, and those determined to be living in a "marriage-like relationship" with another person, including a person of the same sex, are generally precluded from receiving PP (single).

The question of whether two people are living in a "marriage-like relationship" is complex, and takes account of many factors, with a non-exhaustive list in section 4(3) of the SSA. They include financial aspects of the relationship, the nature of the household, social aspects, any sexual relationship and the extent of the persons' commitment to each other.

A person applying for, or receiving, PP (single) may be obliged to provide Centrelink with information on their living arrangements and relationship with the other person. Failure to provide the information will lead to refusal, suspension or cancellation of the PP (single). If the information provided by the person does not establish that the person is single, the PP (single) is not payable.

Parenting Payment is also not paid if:

  • another person is receiving PP for the same child;
  • the person's partner is receiving PP;
  • the person is receiving another social security payment, or payments under another Commonwealth scheme; or
  • the person is serving a waiting or deferment period.

Participation Requirements

A Parenting Payment recipient may be required to sign an Employment Pathway Plan. Failure to comply with the Parenting Payment Employment Pathway Plan may result in a penalty being imposed. The penalties are the same as for Newstart Allowance breaches (see: "Newstart Allowance", above).

Rate of Payment (ss5031068A & 1068B)

There are two rates of Parenting Payment:

  • the Parenting Payment – single rate; and
  • the Parenting Payment – partnered rate.

The PP (single) rate is subject to the same income and assets tests as for pension payments. The income test is subject to frequent changes - check Centrelink for details.

The PP (partnered) rate will depend on whether the person's partner is receiving a benefit. It is paid to a person whose partner is receiving a social security pension, a service pension, or if the family is on a low income. An asset limit applies which is the same as the pensioner assets test.

A person receiving the PP (single) or the benefit PP (partnered) is entitled to receive the Pharmaceutical Allowance, Rent Assistance and Remote Area Allowance (if qualified). A person receiving non-benefit PP (partnered) is not entitled to these additional benefits.

Baby bonus

The Baby Bonus is a lump sum payment paid to:

  • a parent who is eligible for Family Tax Benefit (FTB) (see below) within 26 weeks of the birth of the child; or
  • a person who is not the parent of the child but who has the care of the child within 26 weeks of its birth and who is eligible for FTB.

A parent may also be qualified for the Baby Bonus for an adopted child or a stillborn child. Generally only one individual is eligible for the Baby Bonus in respect of a child. In some circumstances the Baby Bonus can sometimes be apportioned amongst multiple persons, but cannot exceed 100% of the current rate.

The current amount of the Baby Bonus is $5,437 per child, and is paid in 13 fortnightly instalments. A higher amount is paid in the first instalment. The Baby Bonus is income-tested and payable to families with an adjusted taxable income of $75,000 or less in the six months following the birth of the child or the child's entry into care. There is no assets test.

Paid Parental Leave (PPL)

Under the PPL scheme eligible parents/carers who have or adopt a child after 1 January 2011 are paid a maximum of 18 weeks parental leave pay, at a weekly before-tax rate of $606.45. Applicants must be the primary carer of the newborn or recently adopted child, meet work, income and residency tests, and not be working.

The work test requires that the applicant have undertaken qualifying work (at least one hour per day) for at least 10 of the 13 months prior to the birth or adoption, and for at least 330 hours in that 10-month period. No more than eight weeks may elapse between two consecutive qualifying work days. Exceptions may apply for premature births or where pregnancy complications prevent work.

PPL and the baby bonus – cannot both be paid for the same child.

Family Tax Benefit

Eligibility (ss2122Family Assistance Act)

To be eligible for FTB an adult must have at least one "FTB child" and be an Australian resident, or hold a Special Category or prescribed visa. An FTB child is generally under 18 where the adult is legally responsible for the child's day-to-day care, and the child is in the adult's care and living in Australia or with the adult. Persons aged 18-20 may also be an FTB child if in an adult's care and living in Australia or with the adult. Persons aged 21–24 may be an FTB child if in an adult's care, living in Australia or with the adult, and undertaking full-time study (although the maximum age for FTB will be 21 from 1 January 2012). Rent Assistance can be paid with FTB(A). An FTB activity test may apply if the child is aged 16-20. FTB(B) provides extra assistance to predominantly single-income families.

Since 1 July 2011, payment of FTB(A) for a child turning four is conditional on the child undergoing a health check.

The base rate of FTB(A) can be paid for three years of temporary absence from Australia. More than the base rate of FTB(A) and (B) can generally be paid for only 13 weeks of a temporary absence from Australia. However, the length of the recipient's last return to Australia, or type of visa held, may affect entitlement to FTB while absent from Australia.

FTB can be paid as a fortnightly payment, as a reduced tax instalment or as an end of the year lump sum tax rebate. There is no assets test for FTB (A) or (B).

Only one member of a couple caring for an FTB child can be paid the FTB. If the parents are separated FTB can be divided between both parents depending on the proportion of care each provides for the child. However, if the level of care provided is less than 35%, the child is not taken to be a FTB child of that care provider.

Rate of Assistance (s58Schedule 1)
The rate of payment depends on the age of the child, with different maximum rates of FTB(A) for children aged 0–12 years, 13–15, 16–17, and 18–24. A different minimum rate of FTB(A) applies to children under 18 and to those 18–24.

FTB(A) is subject to an income test. The maximum rate of FTB(A) is paid where the taxable income of the adult is less than the threshold in the current year of income. For every $1 received as income above this amount the rate of FTB(A) reduces by 20 cents. The minimum rate of FTB(A) is paid where taxable income is less than the higher income threshold for the current year. The threshold is increased for the second and any subsequent children. For every $1 received as income above this amount the rate of FTB(A) reduces by 30 cents until the rate is nil. There is no income test for persons receiving a social security payment.

The rate of FTB(B) also depends on the age of the child; either 0–5 years or 5–18. Once income exceeds the threshold, the rate of FTB(B) is reduced by 20 cents for every $1 of income above this amount.

Note: FTB(B) is paid to families where the primary earner has an adjusted taxable income of less than $150,000. In which case, it is the income of the lower earner that affects how much FTB(B) the family will receive.

Income and assets tests for Sickness, Youth, Newstart and Parenting Payment (Partnered)

Parental Means Test (s1067E)

A person under the age of 21 receiving Youth Allowance is subject to a parental means test unless they fit into one of the exceptions: for example, the person is independent (see s1067A SSA), or have a parent receiving a social security pension or benefit or a service pension (see: "Rate of allowance" under "Youth Allowance", above).

If the parental means test applies, the benefit or allowance payable may be reduced by reference to the parents' assets or income.

Ordinary Income Test (ss10671068)

If a person is receiving Sickness Allowance, Youth Allowance (see separate discussion above) or Newstart Allowance, the rate of payment to them may be reduced by their income.

A person receiving Youth Allowance is allowed to receive "free" income of $143 a fortnight (jobseekers) or $400 a fortnight (students). The rate of payment will then be reduced by:

  • 50 cents for each $1 between $143 and $250 (job seekers) or $400 and $480 (students) of fortnightly income; and
  • 60 cents for each $1 of fortnightly income above $250 (jobseekers), or $480 for (students).

Recipients of Youth Allowance (Student) can accumulate up to $10,000 of any unused portion of the fortnightly income-free area as Income Bank credits, which can be used to offset income that exceeds the fortnightly income free area.

Assets Test (ss547C611680)

A person whose assets are above the relevant limit receives no payment. The limits differ for single and partnered persons, and for homeowners and non-homeowners.

Special Benefit and Carer Allowance

Special Benefit

Eligibility (ss7729731)

Special Benefit is a "safety net" that provides income support for people who do not qualify for another social security payment, and who need financial support.

To be eligible for Special Benefit the person must:

  • not be eligible for a pension or benefit under the SSA or a service pension under the Veterans' Entitlements Act 1986 (Cth);
  • not be disqualified for Newstart Allowance because of industrial action, being a seasonal worker, moving to a low employment area or breaching the requirements of the SSA;
  • not be disqualified for Parenting Payment or Austudy for failure to meet participation requirements;
  • not be disqualified for the Youth Allowance because of failure to satisfy the activity test or breaching the requirements of the SSA;
  • be a resident of Australia or hold a visa that the Minister determines eligible for Special Benefit; and
  • be unable to earn a sufficient livelihood for self and dependants.

The SSA gives Centrelink discretion to decide whether to recognise a person as "unable to earn a sufficient livelihood" and to determine whether Centrelink should pay them. These decisions are affected by:

  • whether they are able to support themselves or receive adequate support from their families;
  • the reasons behind their lack of support; and
  • the nature and extent of their financial hardship.

A two-year waiting period may apply to Special Benefit applicants. An exemption applies for holders of a specific class of visas, or where there has been a significant change in circumstances beyond the person’s control.

Typical cases where Special Benefit may be paid include:

  • resident children, whose parents are not entitled to payments;
  • victims of natural disasters;
  • people on Criminal Justice Stay Visas or some other temporary visas; and
  • migrants who are too old to receive Newstart Allowance but cannot meet the residence requirements for Age Pension.

These categories are not exhaustive. Both the Secretary and the appeals tribunals will look at the circumstances of each case.

People receiving Special Benefit who are holders of designated temporary protection, humanitarian, and safe haven visas are usually required to meet the activity test from 13 weeks after the visa is granted (see: "Newstart Allowance", above). People living in isolated areas, some carers, pregnant women, parents, and some people who are temporarily ill are specifically exempt, as well as those covered by the "special circumstances" general discretion.

Failure to comply with the activity test or Special Benefit Employment Pathway Plan may result in a penalty being imposed. The penalties are the same as for Newstart Allowance breaches (see above).

Rate of Benefit (s746)

Special Benefit is paid at a rate which does not exceed the rate of Newstart Allowance, Austudy or Youth Allowance (see above) that the person would receive if they qualified for that benefit.

Centrelink has a discretion to pay Special Benefit at a lower rate. A strict income test applies, so that the rate of payment is reduced by $1 for every $1 of the person's income. There is no "free area" for Special Benefit, so any income reduces the payment rate, which may also be reduced if the person is in receipt of free board and/or lodgings.

The assets test for Special Benefit is generally also used for Sickness Allowance and Newstart Allowance (see: "Income and assets tests for Sickness, Youth, Newstart and Parenting Payment (Partnered)", below). For a long-term payment of a special benefit, available funds must be no more than $5,000.

Rent Assistance may also be payable (see: "Rent assistance", below).

 

Carer Payment

Eligibility (ss7197-198)
A person may be paid a Carer Payment if they provide constant care, including supervision, in the carer's own home to:

  • a disabled adult (s198);
  • a disabled adult and a dependent child (s198);
  • a child with a "severe disability" or a "severe medical condition" (s197B);
  • two or more children with a disability or medical condition (s197C);
  • a disabled adult and one or more children each with a disability or medical condition (s197D);
  • a child who has a terminal condition (s197E);
  • a child with a severe disability or severe medical condition on a short-term or episodic basis (s197G); or
  • a "profoundly disabled child", or two or more "disabled children" (pre-1 July 2009 saved cases).

A person may also be paid a Carer Payment if they exchange care, under a parenting plan, of two or more children each with a disability or medical condition (s197F).

Carer Payment claims in respect of children with disabilities or medical conditions are assessed against the "Disability Care Load Assessment (Child) Determination", which requires an assessment by a "treating health professional", such as the child’s doctor, registered nurse or registered psychologist.

To receive a Carer Payment to care for a disabled adult the adult must be assessed under the Adult Disability Assessment Tool (ADAT), on the basis of the responses provided in the treating health professional report. This report may be completed by a doctor, nurse, occupational therapist or an Aged Care Assessment Service.

A person cannot receive Carer Payment as well as another income support payment. However, the person may be entitled to other payments such as Carer Allowance or Family Tax Benefit. A person who receives a Carer Payment for a child should also be entitled to Carer Allowance.

The person being cared for must meet the care receiver income and asset test. There is no obligation to live with the cared for person, only to provide constant care. A person receiving carer payment is entitled to receive payment for up to 63 days per year while taking respite from care.

Rate of Payment (ss2101064)

The basic rates of Carer Payment are to the same as for the Age Pension. The rate of the Carer Payment is subject to the pension income test or assets (see: "Income and assets tests for pensions", below).

A pensioner may also be eligible for Rent Assistance and other supplements that increase the pension above the standard rate.

Income and assets tests for pensions

The rates of each of the above pensions are subject to either the income test or the assets test, unless the pensioner is permanently blind. Where a person has both income and assets, the test that produces the lower payment applies.

Income Test (ss8106410651066A1066BPart 3.10)

The income test allows a pensioner to earn income to a point before the level of pension is reduced. The level depends on the person's marital status. For each $1 of income in excess of the set level, the weekly pension is reduced by 50 cents (single pensioner) or 25 cents each (partnered pensioner).

Employment income is subject to a Work Bonus for pensioners over Age Pension age. The Work Bonus was introduced from 20 September 2009 to replace the Pension Bonus Scheme. The first $250 of income in a fortnight is disregarded from the income test. Also if a person does not earn money in a fortnight they may accrue the $250 to count alongside future earnings. A person can accrue up to $6,500. This is in addition to the normal allowable income threshold.

A permanently blind person can receive the Age or Disability Support Pension, regardless of income (s1065).

The income of a partnered pensioner is equal to half the combined income of the person and their partner.

Income is defined very broadly in the SSA. It is different to the definition for income tax law. It includes amounts that are "earned, derived or received for the person's own use" and periodical payments or benefits by way of gifts or allowances. "Income amount" means valuable consideration, personal earnings, moneys or profits (whether of a capital nature or not) (s8). Among other things, income includes bank interest, regular superannuation payments and rent paid by tenants. (For workers compensation payments,see: "Compensation and damages payments", below.)

Several types of income are not assessed under the income test, for example:

  • loans that a person receives;
  • payments under the SSA;
  • emergency relief;
  • insurance payments for loss of property; and
  • refunds from Medicare or health insurance funds.

A complete list of exempt income appears in section 8(8) of the SSA.

Income is defined as gross income without any reduction (s1072) except where a person carries on a business when expenses involved in gaining that income may be deducted (ss1074 & 1075). Offsetting a loss from one source against other income is not permitted.

Income from "financial investments" (s9), unless exempt by the Minister (s1084), is assessed in the following way (Part 3.10):

  • the value of all the person's investments are added together;
  • investments under the threshold are deemed to earn 3% interest; and
  • the amount over the threshold is deemed to earn 4.5%.

Note: The deeming rates and thresholds change periodically. Check with Centrelink for current rates.

This is a complex area and any specific queries should be taken to a community legal centre, Tasmanian Legal Aid or a solicitor.

Assets Test (s11Part 3.12)

A pension is reduced under the assets test if the total net value of the person's property or assets (apart from their home) exceeds the relevant limit, which changes annually.

For each $1,000 of assets in excess of the limit, the fortnightly pension is reduced by $1.50 per fortnight (single and couple combined).

A permanently blind person will continue to receive Age or Disability Support Pension, regardless of assets.

The value of a person's assets is the current market value, the amount the assets could be sold for less any debts owed on the assets, and is not the replacement value or the original cost.

There are many things excluded from the asset test including the "principal" home (as long as the person is living in it), and surrounding land of up to two hectares , special aids for disabled people, and pre-paid funeral expenses. A list of the assets exempt from the asset test appears in section 1118.

The value of an asset may be excluded under the "hardship provisions", if the pensioner cannot sell or realise the asset or use it as security for borrowing (or if it would be unreasonable to expect the pensioner to sell, realise or use the asset as security) and if the pensioner would suffer severe financial hardship. For the hardship provisions to apply, a person must make a specific claim to Centrelink, consideration is not automatic.

If the hardship provisions apply, the level of pension might be reduced by the income which could be earned from the pensioner's use of the asset (ss11291130 . This means that the value of the asset may still affect the rate of pension payable.

A person of age pension age who qualifies for Carer Payment or Age Pension or is the partner of such a person, may also be eligible for consideration under the "extended land use test". They have to have a 20-year continuous attachment to the land and principal home. They also have to be making "effective use of the land", meaning that if the land or part of it is productive, it is being used to generate an income. If successful, all land held on the same title as the principal home, or deemed to be on one title, is exempt from the assets test.

Bereavement Allowance

Eligibility (ss7315)

The Bereavement Allowance is payable for a maximum of 14 weeks after the death of a person's partner. Where the person is pregnant at the time of her partner's death, this period may be extended to the end of the pregnancy (when, in the normal course of events, she would become eligible for the PP (single) (see: "Parenting Payment").

To qualify for this payment, the person must have been a member of a couple whose partner has died. If the person and their partner were Australian residents when the partner died, no previous residence is required. Otherwise, the person has to have been an Australian resident and in Australia for 104 weeks or have a qualifying residence exemption. Alternatively, a woman can qualify for this allowance if, immediately before the death of her husband, a Wife Pension or Partner Service Pension (see: Part III of the Veterans' Entitlements Act 1986 (Cth)  was payable to her and she was not in Australia at the time of her husband's death.

Rate of Allowance (ss3291066)

The rate of Bereavement Allowance is the same as for the single Age Pension including the Pension Supplement. The rate payable is subject to the pension income or assets test.

Compulsory Income Management

From 1st of July 2012 some welfare recipients living in a declared area may be subject to Compulsory Income Management. Income Management (also known as ‘Welfare Quarantining’) refers to arrangements whereby a percentage of the income support and family payments will be set aside to be spent only on ‘Priority goods and services’. (SSA Act, ss123TH)

The payment is not reduced, but part of the payment is restricted to be used on ‘Priority Goods and Services’. This means a welfare recipient will lose the discretion to spend a percentage of their welfare income on things other than those deemed to be priorities. The recipient will be issued with a Basics Card, which can be used for payment of food, clothing, health items, education and training, child care, housing, household utilities, public transport and acquisition, repair and maintenance of motor vehicle. The Basics Card can be only used at the approved stores and businesses through the EFTPOS system.

Declared Areas for Compulsory Income Management

There are five targeted areas.  The whole of the Northern Territory is a declared area.  In Western Australia, Kimberley region and Perth, in Queensland the area of Rockhampton and Logan,  in NSW the area of Bankstown, In South Australia, the area of Playford and in Victoria the area of Shepparton are all declared areas (SSA Act, ss123TFA). While section 123TFA has been repealed, the Determination of these areas as declared areas is still in force.

Who May Be Affected in these areas?

There are five categories of people who will be affected: (SSA Actss123UA-123UFA)

  • Young people under 25 who have been on nominated payments for at least 13 weeks in the last 26 weeks;
  • ‘Long-term unemployed’ over 25 who been on nominated payments for at least 52 weeks in the previous 104 weeks;
  • Income Support recipients assessed as ‘vulnerable’ by a Centrelink social worker;
  • Individuals referred for income management by child protection authorities;
  • Individuals who request voluntary income management.

For Shepparton welfare recipients though only categories 3, 4 and 5 will be applicable.

Welfare recipients subject to compulsory income management have right to apply for an exemption. The exemptions available depend on whether the recipient is the main carer of a school age child. (SSA Act, ss123UGB-123UGG) For details contact 132 594 or visit Centrelink’s website.

Recipients also have an appeal right in relation to income management. Please see Social Security Appeals process explained below. However a referral from a child protection to income management should be appealed to within the Child Protection Authority who made the referral.

Concession Cards

Health Care Card

The Health Care Card is automatically issued to those receiving a social security allowance or benefit including those receiving the maximum rate of Family Tax Benefit (A) and those receiving Carer Allowance for a child with a disability.

Parents who have a child with a disability who do not receive the Carer Allowance may be issued with a Health Care Card subject to an income test. Low income individuals and families are issued with a Health Care Card if their weekly income does not exceed the set threshold. Income is assessed over eight weeks prior to claim.

Pensioner Concession Card

The Pensioner Concession Card is issued to those in receipt of a pension, including Parenting Payment (single), from Centrelink or the Department of Veterans' Affairs. Newstart Allowance, Parenting Payment (partnered), Sickness Allowance and Special Benefit recipients over 60 years of age who have been receiving the benefit for at least nine months will also be entitled to the Pensioner Concession Card.

Newstart Allowance, Parenting Payment (partnered) and Youth Allowance (job seeker) recipients assessed as having a partialcapacity to work, and Newstart Allowance and Youth Allowance (job seeker) recipients who are single principal carers of a dependent child, are also eligible for a Pensioner Concession Card.

Commonwealth Seniors Health Card

A person of age pension age who does not receive a pension may be entitled to the Seniors Health Card if their yearly income does not exceed the threshold set out in section 1071-12.

Crisis Payment and Rent Assistance

Crisis Payment

A person may be eligible for a payment in particular situations if they are in severe financial hardship and have just come out of confinement, are recently homeless in some situations (such as domestic violence) or have just arrived in Australia on a humanitarian visa or another reason in the legislation applies. These claims must generally be made within seven days of the circumstance occurring.

Rent Assistance (ss1070-1070Y)

A person qualified for social security pension, benefit or allowance, or FTB(A) at greater than the base rate, may qualify for additional Rent Assistance.

The assistance is payable to a person only if they pay at least a minimum amount of rent, which varies depending on their marital status. The assistance is not payable to a person who pays rent to a state housing authority (such as the Office of Housing). The amount of the Rent Assistance varies according to the amount of rent paid, increasing until the maximum Rent Assistance rate is reached. If a person or their partner is paid FTB, then Rent Assistance is paid as an addition to that payment rather than as an addition to the pension.

Special rules apply to single sharers, people who pay board and lodging or live in a retirement village. Special rules also apply if the person is under 21 and receiving a Disability Support Pension.

Rent assistance is not paid if the person is under 25 and living in the parental home while receiving NewStart Allowance.

Rent assistance is paid as part of another payment and may be reduced due to the income test applicable to that payment.
 

International Agreements and Portability

Formal agreements exist between Australia and Austria, Belgium, Canada, Chile, Croatia, Cyprus, Czech Republic, Denmark, Finland, Germany, Hellenic Republic, Ireland, Italy, Japan, Korea, Macedonia, Malta, The Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Switzerland and the USA.

The Agreement with the United Kingdom ended on 1 March 2011. For information on claiming UK Pensions, paying voluntary contributions or other matters relating to UK social security, visit the website of HM Revenue and Customs or Department for Work and Pensions or The Pensions Service.

The agreements allow residents who move from Australia to the country concerned or to Australia from one of these countries to qualify for some pensions in the destination country without meeting the normal residential requirements. International agreements are now found in the Social Security (International Agreements) Act 1999 (Cth).

These agreements do not apply to all social security payments. This is a complex area and any specific queries should be taken to a community legal centre, Tasmanian Legal Aid or a solicitor.

Portability (ss1211-1221)

A pension or allowance may be portable if the person was receiving a payment immediately before they left Australia, or if the payment is granted after they have left Australia. The period a payment may be paid overseas will depend on whether the particular payment has unlimited portability or limited portability, and whether an International Agreement (see above) applies.

Limited portability of up to 13 weeks applies to Disability Support Pension, Carer Payment, Widow Allowance, Parenting Payment, Youth Allowance (full-time student), Austudy, Partner Allowance and Carer Allowance for a temporary absence. A person is temporarily absent from Australia if they remain an Australian resident while absent. Carer Payment recipients travelling without the caree are restricted to payment for 63 days of respite in a calendar year.

Limited portability also applies to Youth Allowance (not undertaking full-time study), Newstart Allowance, Sickness Allowance and Special Benefit for a temporary absence from Australia. However, the temporary absence must generally be for one of the following purposes:

  • seeking eligible medical treatment;
  • attending to an acute family crisis; or
  • for humanitarian purposes.

Limited portability is up to 13 weeks.

For temporary absences from Australia, ancillary payments (such as Rent Assistance) are payable for the same length of time as the substantive payment or up to 26 weeks, whichever occurs first. The person must also remain qualified for the ancillary payment.

The portability period can be extended only for the following:

  • a serious accident or illness;
  • hospitalisation of the person or a family member;
  • death of a family member;
  • custody proceedings in which the person is involved;
  • a legal requirement to attend court because of criminal proceedings;
  • a serious crime committed against the person or a family member;
  • a natural disaster;
  • political/social unrest or war; or
  • industrial action.

Unlimited portability applies to the Age Pension, certain terminally ill Disability Support Pensioners, Bereavement Allowance, and certain recipients of Wife Pension and Widow B Pension (Note that Wife Pensions and Widow B Pensions are being phased out). After 26 weeks the rate of payment for these pensions may be affected by the period of the person's working life residence. "Working life residence" is the person's period of Australian residence occurring between the age of 16 and age pension age. If a person has spent 25 years or more in Australia they are entitled to the maximum rate of pension.

From 1 July 2012, Disability Support Pension recipients with a permanent disability and with no further work capacity may be eligible to be paid indefinitely if they wish to leave Australia to be with their relatives or family members. To be eligible they need to satisfy a new work capacity assessment before their departure. These assessments need to be completed in Australia and may involve a medical review.

No payments are portable if they are based on a short-term residence of two years or less.

Compensation and Damages Payment

Compensation payments (Part 3.14 and section 17) are treated differently under social security law. Section 17 (SSA) defines "compensation" for social security purposes. To be considered "compensation" for social security purposes the payment must include a component for economic loss and Centrelink will look at the settlement and decide whether this is the case. Otherwise, such payments will generally be treated as ordinary income.

A person who receives compensation will have their "compensation-affected payment" affected (most major payments are compensation-affected), depending on whether they receive compensation in the form of a periodic payment, or as a lump sum settlement or court judgment.

A person who is receiving periodic payments of compensation for a loss of income will have their "compensation-affected payment" reduced by the amount of those payments on a dollar-for-dollar basis.

Where a person recovers compensation in a lump sum, the person is precluded from receiving a social security payment for a period which is directly related to the amount of compensation or damages.
The amount which Centrelink is entitled to recover in either of these ways will depend upon a formula set out in the SSA. This is a complex area and any specific queries should be taken to the solicitor who is handling the damages or compensation claim.

Where a person has been receiving a compensation-affected payment and later recovers compensation covering the same period, the person is liable to repay the social security payments. Usually Centrelink will recover the social security money paid to a person from the employer or insurance company.

If Centrelink decides that there are special circumstances relating to the person receiving compensation, it can treat some or all of the compensation paid as not having been paid. This decreases the preclusion period or the amount to be repaid to Centrelink, or both.

Income Tax and Overpayments

Income Tax

Pensions

Some pension payments form part of the pensioner's taxable income. These are:

  • Age Pension;
  • Disability Support Pension paid to a man over 65 and a woman over age pension age;
  • Widow Pension;
  • Wife Pension – if over age pension age or if husband over 65;
  • Carer Payment if carer or person being cared for is of age pension age; and
  • Parenting Payment.
  • Most supplements are not included in taxable income, along with:
  • Disability Support Pension if under age pension age;
  • Wife Pension if both under age pension age;
  • Carer Payment if both under age pension age;
  • Crisis Payment; and
  • Double Orphan Pension.

Although some pension payments are included in taxable income, a special income tax rebate for pensioners ensures that people whose only income comes from social security pensions will pay no income tax.

More information is available from the Australian Taxation Office (ATO). Again, advice from a lawyer or accountant should be obtained on this complex area if any problems arise.

Allowances

Special Benefit, Sickness Allowance, Youth Allowance and Newstart Allowance paid to a person and their spouse form part of their taxable income.

FTB(A) and (B) and Rent Assistance are not included in taxable income.

A special income tax rebate for beneficiaries reduces the chance of a beneficiary paying income tax unless they have income in addition to the benefit. More information is available from the ATO. Advice from a lawyer or accountant should be obtained on this complex area, if any problems arise.

Overpayments

Chapter 5 of the SSA

Where a person is paid a pension, benefit or allowance to which they are not entitled, a debt may be due to the Commonwealth.

A 10% penalty may be added to debts resulting from a refusal or failure to provide information in relation to employment income, or knowing or reckless provision of false or misleading information in relation to employment income if the person doesn't have a reasonable excuse.

If the person is still receiving a payment, a debt can be recovered by withholding part of the payment. The Commonwealth Government can also recover an overpayment by civil court proceedings. Other means of recovery include:

  • garnishee (commonly from wages or bank accounts);
  • repayment by instalments; and
  • recovery from a third party.

In some circumstances, Centrelink may write off or waive recovery of the debt. Centrelink may only waive recovery of a debt in certain defined circumstances (ss1237–1237AB) including where:

  • the debt has been caused 100% by an error made by Centrelink, and the person received the payment in good faith;
  • the person with the debt has special circumstances, and the debt was not caused by a person knowingly giving false information;
  • a person is prosecuted and sent to jail for the debt, and the judge or magistrate actually says that they are going to jail for longer because they can't or won't pay the debt; and
  • the debt is less than $200.

Similarly, write off criteria are outlined in section 1236. Any person who is faced with a demand for recovery of debt should immediately seek independent advice (from a community legal centre, Tasmanian Legal Aid or a solicitor.

Similar, though not identical, provisions relating to Family Assistance overpayments can be found in Part 4 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth).

A welfare recipient who has a debt raised against them can seek waiver of those debts pursuant to Social Security (Waiver of Debts - Disaster) Specification 2011 if adversely affected by the flooding disasters in late 2010 to early 2011. Section 5(1) of the SSA defines 'Adversely Affected Persons' to include the following:

  • The person or affected family member being seriously injured or killed.
  • The person experiencing psychological trauma.
  • Their principle place of residence being destroyed, sustaining major damage or experiencing utility failures.
  • The person being unable to return to their principle place of residence for at least 24-hours.

This relates to only a portion of the debt that arose during the disaster period between 1 November 2010 until 19 March 2011.

Recent Changes about Notification Obligations

Section 66A of the SSA Act requires the recipient to inform Centrelink if an event or change of circumstances occurs that 'might affect the payment of their social security payment or the person's qualification for the concession card'. While this section will have most relevance to criminal prosecutions, it may also have implications for overpayments. The requirement has been maderetrospective to 20 March 2000.

Social Security Appeals

Authorised Review Officer

Initially, a person seeking review of a Centrelink decision must request review by an Authorised Review Officer (ARO) (s129Social Security (Administration) Act 1999 (Cth) ("SSA Act")). The ARO will give the person a letter explaining their decision, the facts taken into account and the parts of the legislation or Centrelink guidelines followed in reaching the decision. If the person is dissatisfied with the ARO's decision, the next step is to appeal to the Social Services & Child Support Division of the Administrative Appeals Tribunal ("AAT").

Social Services & Appeals to the Administrative Appeals Tribunal

Most Centrelink decisions can be appealed to the AAT, which has wide powers to make a new decision, for example, to grant a benefit refused by Centrelink, restore a payment cancelled by Centrelink, increase a payment reduced by Centrelink or set aside a Centrelink decision to recover a debt. Decisions that are not reviewable by the AAT are listed in (s144, SSA Act). Some of these decisions are:

  • specifying the nature of claim forms and places of lodgment for claims;
  • requiring persons to give information to Centrelink;
  • about continuing social security payments during an appeal; and
  • to make income tax deductions from payments.

The AAT hearings are usually before one member. Sometimes hearings are before two or three members: a lawyer, a social worker and/or an Executive Member. In medical cases (e.g. Disability Support Pension) the AAT usually has a medical member. Note that the AAT now also hears matters appealable under child support legislation and parental leave pay decisions.

Terms of reference

The AAT is directed to provide a review mechanism that is "fair, just, economical, informal and quick" (s2A, AAT Act). A person affected by a decision of Centrelink under the social security law may appeal to the AAT.

Note that a separate complaints mechanism exists through the Centrelink Customer Relations unit (tel: 1800 050 004) and the Commonwealth Ombudsman where a person is dissatisfied with the actions of a Centrelink worker or a Centrelink process but redress is not available through the AAT (e.g because the decision is legally correct).

How to appeal

An appeal to the AAT can be made:

  • by writing to the AAT;
  • by phoning the AAT; or
  • by visiting or sending a written application to a Centrelink Customer Service Centre, Family Assistance Office or the AAT (see full contact details below). Appeal forms are available but are not compulsory.

Time limits

There is no time limit for an appeal. However, if the appeal is lodged more than 13 weeks after receiving the Centrelink decision, any new decision can only take effect from the date of the appeal (s43(6), AAT Act). This rule effectively restricts arrears, where payable, and there is no discretion to extend the period for lodgment of appeals.

Note that this rule, which also applies at the ARO stage, does not apply where written notification of the decision in question is not sent and does not impose a time limit on a person appealing against a debt decision. This rule also does not apply to family tax benefit decisions where different rules and time frames apply.

Access to information

When an appeal is made to the AAT, Centrelink may be asked by the AAT to send the AAT a full statement of reasons for its decision and a copy of every relevant document in its possession (s157(3), AAT Act). The AAT has the power to require it to submit them.  

Prior to a hearing, a person can demand access to their full records under the Freedom of Information Act 1982 (Cth). The AAT will generally send the person the relevant Centrelink file documents before the appeal hearing, but sometimes the person may wish for additional documents to be considered.

The appeal hearing

Prior to the hearing the AAT may order a pre-hearing conference (an alternative dispute resolution process) between the applicant, the AAT and a Centrelink representative (s34A, AAT Act). These are rare, and may occur in particularly complex reviews. If agreement is reached between the parties, the AAT may be able to give effect to that decision without proceeding to hearing.

At the hearing the applicant may make submissions to the AAT orally or in writing, and may be represented at the hearing by another person (s32, AAT Act). A Centrelink Officer may also attend the hearing. The hearing can be conducted by telephone or other electronic communications equipment if necessary. The AAT will provide an interpreter if needed.

The hearing is to be informal: the SSAT is directed to act speedily and is not bound by technicalities, legal forms or rules of evidence (s32(1)(c), AAT Act). However, the AAT can take sworn evidence (s40, AAT Act), and require Centrelink to provide further relevant information in its possession (s40A, AAT Act). 

The hearing is in private (s168, SSA Act).

The person appealing is generally responsible for their own costs and expenses; but the AAT may decide to reimburse individuals for travel and accommodation expenses, and for any medical expenses where the AAT arranges a medical examination (s176, SSA Act).

The AAT's powers

When reviewing a Centrelink decision, the AAT can affirm or vary the decision, set it aside and substitute a new decision or send the matter back to Centrelink for reconsideration. When reviewing a decision, the AAT has all the powers and discretions that are given to Centrelink (s43, AAT Act).

Accordingly, if the AAT decides that the appeal should succeed, it can substitute a new decision, favourable to the person appealing, or send the matter back to Centrelink with a direction that Centrelink make a new (favourable) decision. As noted above, if the person has appealed within 13 weeks of the Centrelink decision, the AAT decision will be backdated to the date from which the original Centrelink decision took effect; otherwise, the AAT decision will be backdated to the date of the appeal.

Continuation of payment pending appeal

Where Centrelink has cancelled, suspended or reduced a pension, benefit or allowance under the Social Security Act, and the person affected has appealed to the AAT, Centrelink has the power to declare that payment of the pension, benefit or allowance should continue until the appeal is decided or withdrawn (s145, SSA Act). The AAT cannot hear an appeal against Centrelink's decision under section (s145). An urgent hearing should be sought instead as the decision appealed against will operate until the AAT decides to vary it or set it aside. A person can also lodge a complaint to the Commonwealth Ombudsman if dissatisfied with actions of Centrelink.

 

Contacts and Resources

Centrelink

For information about current payment rates: check the telephone directory or the Centrelink website (address below) and call the 13 number (for cost of a local call) relating to the payment you need information about.

The booklet Guide to Australian Government Payments, and much other information on social security payments, is available on the Centrelink website.

Social Security Appeals Tribunal

8th Floor, 188 Collins Street, Hobart
(GPO Box 9943, Hobart Tas 7001)

E-mail: hobart@ssat.gov.au
Freecall: 1800 011 140
Phone: (03) 6211 2800
Fax: (03) 6211 2899

Key Staff:
Senior Member: Irene Tsiakas (a/g) (based in Melbourne)
Deputy Registrar: Marianne Evans (a/g) (based in Melbourne)

Publications

The Guide to Social Security Law published by Centrelink (which sets out the rules it follows in administering all income security programs) can be inspected at a Centrelink office.

The text of the SSA, with annotations based on AAT and Federal Court decisions, is set out in Social Security and Family Assistance Law, published by the Welfare Rights Centre, Canberra and Federation Press, Sydney.

The Social Security Reporter, published electronically four times a year, reports current tribunal and court decisions and developments in social security law. It can be ordered by using the subscription form available at www.ssr.org.au.

CCH publishes an up-to-date publication on social security law.

Each year, Centrelink produces up-to-date pamphlets on the pensions and benefits currently available and the rates at which they are paid.

Disclaimer

This does not constitute legal advice and the Tasmanian Law Handbook should not be used as a substitute for legal advice. No responsibility is accepted for any loss, damage or injury, financial or otherwise, suffered by any person acting or relying on information contained in it or omitted from it.