B19/1990 EARNINGS CREDIT

DATE OF ISSUE:  10 May 1990

EARNINGS CREDIT

BACKGROUND

The purpose of the earnings credit scheme set out in section 49B of the VEA is to allow service pensioners with little or no means apart from the pension to take up paid work without suffering an immediate reduction in pension or loss of fringe benefits.

2.The current formula for accruing credit is calculated by deducting the pensioner's fortnightly income from the relevant fortnightly basic income limit (BIL).

3.It has been seen that this method required simplification, not only to reduce administrative complexity, but to encourage increased usage by pensioners. As pensioners are not obliged to advise the Department of income details below the basic income limit, accurate calculation of the earnings credit for many pensioners is either inaccurate or involves investigation of such income - which is otherwise unecessary.

CHANGES RESULTING FROM 1989 BUDGET

4.From 19 April 1990, the following changes will occur:

.Credit accrual will be standardised for all maximum rate service pensioners. The earnings credit will accrue at the rate of their permissible BIL, regardless of any other income received within and up to that income limit.

-Single pensioners will accrue credit at the rate of $80 per fortnight plus $24 per fortnight for each dependant child (to a maximum earnings credit of $1000);

-Married pensioners will accrue credit at the rate of $140 per fortnight combined, plus $24 per fortnight for each dependant child (to a maximum total earnings credit of $2000, being a combined earnings credit.)

.Asset tested pensioners can no longer accrue an earnings credit. A credit accrued whilst an income tested pensioner can not be retained when a person transfers to an asset tested pension, even if at a later date, that pensioner is again assessed under the income test.

LEGISLATION

5.The definition of a "credit amount" has been altered from the basic income limit less the amount of income received within that limit to the full value of the basic income limit applicable. This has been done by replacing the definition of "credit amount" with new section 49B(1A).

6.A new section 49B(4) has been added to exclude asset tested pensioners from the earnings credit scheme.

PETER HAWKER

NATIONAL PROGRAM MANAGER

BENEFITS PROGRAM