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3.7.5 Assessment of Comparable Foreign Pension Payments

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Last amended: 15 February 2012

Payments are assessed as ordinary income for VEA purposes

Payments of comparable foreign pension are assessed as ordinary income under the VEA income test. Thus, where a pensioner is paid under the income test, every dollar of comparable foreign pension payment over the income free area that the pensioner or their partner receives will result in a reduction at the income test Taper rate in the rate of pension payable. Pensioners are obliged under section 54 to notify the Department of grants or increases in their rate of comparable foreign pension.    

 

Assessment of foreign pension for age pension purposes

For age pension purposes, the assessment of foreign pension payments may not be subject to the standard income test taper rate.  Social Security International Agreements made between Australia and various foreign countries provide in some cases for dollar for dollar deduction of foreign pension payments from specified Australian Government benefits, or for the exclusion of certain foreign amounts from the income test.  For example, under the 2002 New Zealand Agreement, the amount of NZ age pension (known as NZ Superannuation), Veteran's Pension and Invalid's Benefit is deducted on a dollar for dollar basis from the maximum rate of the affected Australian Government payments, (which includes age pension), before the income and assets tests are applied.  The current International Social Security Agreements are available via

https://www.dss.gov.au/about-the-department/international/international-social-security-agreements/current-international-social-security-agreements

Where a person transfers from age pension to service pension or income support supplement, the assessment of their foreign payment under a Social Security International Agreement is not maintained; instead, the usual VEA income test would apply.

Assessment of lump sum arrears of foreign pension

 

 

Where a pensioner receives a lump sum payment for arrears of foreign pension, the lump sum is assessed as if it were received as periodic payments for the period covered by the arrears payment. Any amount by which the person's or their partner's income support payment would have been reduced by the foreign pension income is regarded as a recoverable debt.

Example: On 20 November 2010 a service pensioner receives a lump sum arrears payment of a comparable foreign pension. The arrears payments covers the period 1 August 2010 to 1 November 2010. The lump sum is apportioned over the period 1 August 2010 to 1 November 2010 and any amount by which the person's service pension would have been reduced over this period becomes a recoverable debt.

If there is evidence that the arrears payments should not  be spread evenly over the arrears period, this should be taken into account in calculating the overpayment.  Any investment made with the arrears lump sum, and any income (deemed or actual according to normal rules) will be assessed under the income and assets tests.

Date payments are assessable from

    

 

Payments of comparable foreign pension are assessable as income for service pension or ISS purposes from the later of:

  • the date of grant, or
  • the date on which payment of the foreign pension is confirmed.

The notification period rules will not impact on the effective date of the pension reduction where a person receives a lump sum arrears of foreign pension. The lump sum arrears payment is not assessed in the fortnight of receipt, but is instead regarded as if it were received as a periodic payment for the period covered by the arrears payment.


 

 

The taper rate is used to reduce the rate of a person's service pension or income support supplement if they or their partner have any ordinary income in excess of the ordinary/adjusted income free area (IFA). Any income in excess of the IFA will reduce the maximum payment rate by a 'taper rate' of 50 cents in the dollar (or 40 cents for transitional rate of pension). The result is the income reduced rate.

The same taper rate is also used in disability income rent test calculations to determine the amount of rent assistance for service pensioners and income support supplement recipients.

In addition to the income test taper, any assets in excess of the assets value limit will reduce the maximum payment rate per fortnight by 37.5 cents for every $250 over the Asset Value Limit. The result is the assets reduced rate