Last amended: 20 September 2009
Compliance requirements during specific review periods
It is important that assessors be aware that a pensioner's notification obligations may vary from those generally outlined in You and Your Pension or elsewhere, as a result of their earnings being subject to departmentally-initiated periodic (specific) review. Any amended advice to a pensioner regarding their notification obligations during a specific review period must be considered when determining whether they have complied, which will in turn impact on the date of effect of the pension variation. For example, the standard notification period of 14 days from an event date will not apply if, by agreement, the pensioner's earnings are not to be notified and reassessed every time there is a small variation, but are instead reviewed at the end of a pre-determined period, and then averaged over that period.
Use of specific review periods
Specific reviews are a risk-based, departmentally-initiated review arrangement, used to ascertain and respond to anticipated changes in the pensioner's rate of earnings. Specific review periods are frequently adopted in earnings cases, because the variability of earnings may otherwise require that pensioners continually notify of small changes on a regular (e.g. fortnightly) basis, leading to frequent pension reassessments. A pensioner's notification obligations continue to apply during periods of specific review. However, to avoid onerous reporting requirements, agreement may be reached with pensioners to defer the assessment of some earnings changes (minor and inconsequential amounts) until the end of a review period. Review periods are also valuable as they allow earlier assumptions made in arriving at the held rate of income to be checked against actual earnings.
Agreement with pensioners
Agreement with pensioners to the use of specific review periods in respect of their earnings must include:
- their consent to a periodic review, involving the processing of their earnings information at a later agreed time and the making of appropriate pension adjustments (including retrospective increases) at that time,
- the continuation of the standard notification requirements in other notifiable areas (such as marital status, residence, asset value etc), and
- advice regarding those significant earnings changes (such as new employment, a new pattern of employment, changes in hours etc) that should not be held over to the end of the agreed review period, but which must be notified within the usual 14 day period.
Notification obligations – significant changes in earnings
Specific review arrangements lose their purpose if the pensioner's strict notification obligations under section 54, as outlined in You and Your Pension and in other documentation, are not modified for the duration of the review. Where a pensioner is still required to notify all earnings events (including minor changes to earnings) within the 14 day notification period, and the Department is required to immediately reassess a pension entitlement following the receipt of that advice, there is little value in otherwise maintaining a 13 week (or similar) review period.
For this reason, a pensioner's notification obligations may be appropriately amended during a specific review period, to distinguish those earnings events that can be notified at the end of the review period, from those events that are still notifiable within 14 days of the time they occur.
For example, agreement may be reached with the pensioner that a change in employment, working additional hours or increases in the hourly rate of payment are still to be notified within 14 days of these significant earnings events occurring. At the same time there may be agreement that a short-term change in earnings that is not sustained (for example, working additional hours on one day only) will not be notifiable immediately but may be held over until the end of the review period.
Earnings events that must still be notified within the 14 day notification period cannot readily be distinguished by way of a prescribed dollar value alone, as the significance of the dollar change will vary from pensioner to pensioner. However, it is clear that sustained changes to the type or pattern of earnings, such as the number or hours worked or the hourly rate of payment, represent a significant change in earnings and should still be notified within 14 days.
Changes to notifiable events
Any modifications to a pensioner's normal notification obligations during a period of specific review must be advised and agreed, in writing. Review periods cannot be used where the pensioner does not consent to this arrangement. In this case the pensioner remains subject to the standard notification requirements, and must notify (within 14 days) any change in earnings likely to result in the minimum pension reduction amount of $1.
The distinction between those earnings events notifiable within 14 days, and those events which are by agreement held over until the end of the review period, is critical in determining whether a pensioner has breached, and will assist in determining the date of effect of pension reassessments.
The legislative basis for modifying a pensioner's notification obligations during a period of specific review is contained in section 54, which provides only that the notifiable events and changes in circumstances are to be specified, in writing. Where a pensioner receives advice regarding their modified notification requirements in respect of earnings during a period of specific review, that amended advice replaces the earlier general advice issued by way of You and Your Pension or in other unrelated correspondence.
Length of review periods
The VEA requires only that the annual rate of income be held, and does not provide for earnings to be reviewed over a specified period. The use of review periods is an internal administrative procedure only, for the sole purpose of assisting with the assessment and updating of variable earnings to arrive at the annual rate of income. Accordingly, the length of review periods should have regard to the particular circumstances of the pensioner's employment. A review period of three months (13 weeks) is frequently chosen, as this allows for regular updating of the held rate of earnings, while avoiding continual short-term pension reassessments. Longer or shorter review periods may however be preferred, if the pensioner's earnings are known to be either very consistent (such as an unchanging contract payment) or very variable.
Review periods should be brought forward, or the end date revised, in all cases where this will result in a more accurate determination of the pensioner's annual rate of income, as it varies during the review period.
A review period of 12 or 14 weeks may be preferred to a period of three months (13 weeks), where the pensioner is paid fortnightly.
End of review period is not an earnings event
For date of effect purposes, the end date of a specific review period is not automatically regarded as the date of a notifiable event or change in circumstances requiring a pension reassessment. It is necessary that the end-of-period review examine the actual changes to earnings over the duration of the review period, which may establish that a notifiable event occurred during the period. Where a notifiable event was not reported, the date of effect will be based on the event date, not on the date that the review period ended.
Where the pensioner complies with their notification obligations during the review period, the end date of the review period may be determined to be the date of effect, by specifying this date in the amending determination.
Earnings advice received during the review period
Advice of earnings changes received from pensioners during the review period, in response to their continuing notification obligations (a pensioner-initiated review), must still be assessed at the time they are received. It is not correct to defer a pension reassessment, in response to notified changes, until the end of the review period. To do so may result in a debt that would otherwise be avoidable. The notified changes should be used immediately to refresh the held rate of income, and may result in an immediate pension reassessment, or alternatively may extend the end date of the current review period.
The date of effect for earnings changes notified during the agreed review period is the same as for other pensioner-initiated changes, being the end of the notification period (for compliance), or the event date (for non-compliance).
Specific Reviews conducted annually
It may be necessary in some circumstances to conduct an annual review of a pensioner's income and assets. This usually occurs where a pensioner owns or has an interest in a private trust or company, is involved in a partnership, is a sole trader or has property rental income.
The need for an annual review arises because the completion of the income tax return or financial statements at the end of the year may be the first time over the course of the year that there is reliable evidence showing the rate of income and asset value of the entity.
In these cases, the date that the income tax return or financial statements are finalised and notified to the Department may be regarded as an event or change in circumstances, for the purposes of determining the date of effect of a pension change.