You are here
5.6.7 Calculating the Bonus
Last amended: 22 April 2014
Rate of pension payable
In order to calculate the amount of pension bonus to be paid, the department must first determine the rate of pension payable when income support pension is granted. If the rate of pension to be paid is zero, then the bonus payment will also be zero.
Standard formula for calculating amount of pension bonus
The basic formula used to calculate a person's amount of pension bonus payable (calculated to 3 decimal places) is as follows:
(annual pension rate) x (pension multiple) x (no. of years in the overall qualifying period)
Where there has been a change of marital status or a change in the pension type being deferred during the qualifying period, different formulae apply.
Change of marital status or pension deferred during qualifying period
A person's pension multiple is calculated using the following formula:
[(0.094) ? (no. of years in the overall qualifying period)].
Annual pension rate
The annual pension rate is a term specifically used for the pension bonus scheme. It is ascertained at the date of grant of the [glossary:designated:] pension. The annual pension rate is the person's pension including only the pension supplement basic amount and excluding rent assistance, and [glossary:remote area allowance:].
Overall qualifying period
The overall qualifying period begins at the start of the first qualifying bonus period and ends at the end of the last qualifying bonus period. If a person has up to five bonus periods, all of these bonus periods are qualifying bonus periods. Where a person has more than five qualifying bonus periods, each of the five most recent full-year bonus periods is a qualifying bonus period. Any period of [glossary:non-accruing membership:] is taken not to form a part of the person's overall qualifying period.
Example of overall qualifying period calculation
Mr Harvey accrues 2 full-year bonus periods. He is then unable to work for 4 months due to illness, after which he continues to work for another 200 days before claiming pension bonus.
The 4 months of sick leave are a non-accruing period and do not count toward Mr Harvey's overall qualifying period. However, because Mr Harvey returned to work and continued to meet the work test after the non-accruing period, his further 200 days of work will count toward his overall qualifying period.
Therefore, his overall qualifying period is 2 years and 200 days or 2.548 years ([2 x 365 + 200]/365).
Example of standard pension bonus calculation
Mr Ford has deferred his pension for 4 full-year bonus periods and is now claiming service pension and pension bonus. He is single and has been single throughout the period he has been deferring the pension. At grant his calculated annual pension rate is $9,390.
Pension multiple is 0.094 x 4 = 0.376
Pension bonus is 9390 x 0.376 x 4 = $14,122.56 (rounded to the nearest 10 cents)
Example of standard pension bonus calculation – last period part-year
Mrs Holden has deferred her pension for 4 full-year bonus periods and a part-year period of 152 days and is now claiming a service pension and pension bonus. She is partnered and has been partnered throughout the period she has been deferring the pension. At grant her calculated annual pension rate is $8,360.
Overall qualifying period is 4.416 years ([4x 365 + 152]/365)
Pension multiple is 0.094 x 4.416 = 0.415
Pension bonus is 8,360 x 0.415 x 4.416 - $15,320.90
Factors that might affect the calculation
The standard formula will not apply in some circumstances. Reference should be made to Section 9 for factors which might require a variation of that formula.
Income support pension is:
- a social security pension
- a service pension;
- an income support supplement.
The pension bonus scheme closed to new entrants on 20 September 2009. Existing members can continue in the scheme under the rules that existed prior to 20 September 2009. The pension bonus scheme provided an incentive for older Australians to remain in the workforce and defer receipt of income support pension. The incentive was a bonus, payable if all eligibility criteria and rules were satisfied.
The pension bonus was a once-only, tax-free lump sum payable to a person who, on reaching their special date of eligibility, voluntarily deferred retirement for at least one year and registered as a member of the scheme. The pension bonus was claimed at the same time as claiming pension and is calculated using the annual rate of basic pension payable at grant, multiplied by the bonus periods accrued.
The pension supplement basic amount is an annual rate paid fortnightly from 20 September 2009. It replaces the GST supplement. It is indexed twice a year in line with CPI increases.
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.
A war widow/widower is generally a person who immediately before their partners death, was the partner of, or was legally married to:
- a veteran; or
- a person who was a member of the forces; and
- who is receiving:
- a war widow's/widower's pension; or
- a pension that is payable under the law of a foreign country that is, in the opinion of the Commission, similar to a war widow's/widower's pension.
Refer to 5E(1) of the VEA for the full definition.
An age pension is a means tested income support payment paid by Centrelink or DVA on behalf of the Department of Families, Housing, Community Services and Indigenous Affairs. The majority of age pensions are paid through Centrelink. However, eligible veterans who have an accepted disability or receive a disability pension from DVA, but do not have qualifying service, may be paid their age pension by DVA. Their partner may also receive their age pension from DVA, if eligible.
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.