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Date of Effect for Annual Reviews
Added to the Section 25 August 2008
Annual reviews of income and assets
Annual reviews of a pensioner's income and asset value may be required where information which confirms the pensioner's income or asset position only becomes available on a yearly basis. This generally arises where a pensioner owns or has an interest in an entity which reports annually, such as a private trust or company, a partnership, a sole trader or has rental income from a property.
In these cases the evidence of the entity's financial performance over the year, and changes in asset value, is usually notified to the Department by a completed income tax return or financial statements.
Notification obligations still apply
The notification obligations still apply to pensioners who are subject to an annual review. If a discernable change to the pensioner's rate of income or asset value occurs during the review year, that change is a notifiable event and the date of effect of the pension reassessment will be based on that event, and whether it was notified within the allowed notification period. For example, the acquisition of a property asset by a pensioner's trust during the review year will be known to the pensioner, and is a notifiable event.
Date of the event or change in circumstances
Where there is no discernable change to the entity's income or asset value during the year, there is no “specified event” on which a date of effect decision can be based. For this reason, the date on which the income tax return or financial statements are finalised and provided to the Department at the end of the review year may be regarded as the notifiable event, for date of effect purposes. For example, a small variation in income received by the entity over the course of the year may not be known until the entity is eventually audited, and may not be able to be attributed to a specified event during the course of the year.
Where the income tax return and financial statements show a reduction in the rate of income or asset value, the date of effect of the favourable determination is the date that the documentation is received. The revised rate is then held for the next review period.
Reductions in pension will take effect from:
- the date of finalisation of the income tax return/financial statements, being the date of the event, where the pensioner fails to provide this information to the Department within the allowed 14/28 day notification period; or
- the day after the notification period where the confirming documentation is provided within the allowed time.
Reviews of employment income
The basis for applying annual reviews to entities such as private trusts and companies, that the documentary evidence confirming changes to income or asset value is not otherwise available during the review year, does not arise with variable employment income.
Extended review periods for variable employment income (generally over three months, but in some cases over 12 months) may be preferred, to avoid onerous fortnightly reassessments. However, they are clearly distinct to annual reviews of private trusts/companies and similar entities, as payslip evidence confirming the actual rate of income is likely to be available on a fortnightly basis.
Unlike the annual review of entities, the Department's decision to apply an extended review period to variable employment income cases should provide for a retrospective date of effect, so as not to disadvantage pensioners.