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3.11.4 Repayment of Lump Sum Advance
Last amended: 5 March 2013
Repayment of advanced amount
An advance is recovered by deductions from the fortnight pension payment. It is recovered over 13 fortnights at the rate of the advanced lump sum amount divided by 13. An advance payment deduction is not to be made from the pension on the same payday that the advance payment is made. The deduction commences from the payday after the advance payment has been made to the pensioner. If multiple lump sum advances are taken, the repayment amount will be the outstanding amount of the first advance plus the amount of the subsequent advance divided by 13.
Repayment of the advance at a higher rate
A person may request a higher rate of deduction. The request must be in writing and the delegate must be satisfied that the pensioner would not suffer severe financial hardship as a result of the increased deduction. The pensioner may also make extra cash or cheque payments to reduce the amount outstanding. The pensioner may then choose to have a reduced fortnightly deduction for the remainder of the original repayment period, or repay at the original rate of deduction for a reduced number of fortnights.
Repaying the advance more quickly than originally anticipated will not necessarily mean that the person will be able to access another advance within the same 13 fortnight period. This is because the lump sum advance available to a person is reduced by the full amount of the lump sum advance already received (regardless of any repayments made) for the following 13 fortnights.
Rounding of the advance payment deduction
The amount for the advance payment deduction is rounded to the nearest cent.
Payment rate insufficient to cover advance payment deduction
The rate of pension (this includes both disability pension and/or income support payments) may be insufficient to cover the amount of advance payment deduction (this may occur where the pensioner undertakes employment during the period where the advance payment is being repaid). In such cases the amount of deduction is taken to be the amount of pension in payment. The amount of income support pension in payment includes any additional amount payable by way of:
- rent assistance;
- pension supplement; and
- clean energy supplement;
- but excludes any amount payable by way of remote area allowance.
As the full repayment has not been made, the number of fortnights over which the advance payment is recovered is increased.
Payability of pension is protected
If the rate of income support pension is reduced to nil because of an advance lump sum deduction, payability of that pension is retained.
Unrepaid advance to a deceased pensioner
If a pensioner dies during a period where a lump sum advance is being deducted from their pension, then the balance outstanding becomes a debt to the Commonwealth. The debt is recoverable from the deceased estate.
Deduction increased at pensioner's request
A pensioner may request that the rate of the advance payment deduction be increased. This request must be in writing and can only be approved if the delegate is satisfied that the pensioner would not suffer severe financial hardship.
Taxation of the advance repayment
The lump sum advance of service pension or income support supplement becomes taxable income as it is repaid. For example, if a veteran on age service pension is granted a lump sum advance of $400, the fortnightly rate of deduction of $30.77 is added to the veteran's taxable pension amount each fortnight until the lump sum amount is repaid. This applies regardless of when the advance was paid during the financial year.
Rent Assistance is an allowance, which may be paid to a service pensioner or income support supplement (ISS) recipient to assist in meeting the cost of rental accommodation.
To receive rent assistance, a pensioner must be paying rent (other than Government rent) for accommodation in Australia, and the amount paid must exceed a certain threshold.
The pension supplement is added to a person's maximum basic rate. The pension supplement is calculated as a 'combined couple' rate. The 'not a member of a couple' rate is 66.33% of the 'combined couple' rate. The member of a couple rate is 50% of the combined couple rate. From 1 July 2010, the minimum pension supplement amount will be able to be claimed on a quarterly basis rather than on a fortnightly basis.
The energy supplement is an ongoing, regular payment designed to help recipients meet the cost of living impact of the carbon price.
Remote area allowance is a supplementary payment added to the rate of income support pension where the pensioner's usual place of residence is situated in a remote area, and where the pensioner is physically present in the remote area.