Date of Effect and Obligations for Changes in Foreign Income

Last amended: 19 April 2011

Changes in exchange rate

Pensioners receiving foreign income are not obliged to notify of changes in the exchange rate that applies to the currency in which they receive that income. Exchange rate changes are applied automatically according to the policies that apply to income received in British pounds and income received in other currencies.    

Increases in foreign pensions

Pensioners receiving foreign income must notify the Department of all increases in their rate of foreign income that might affect their pension.

British state pensions received by Australian residents are fixed and indexation increases are not applied. Pensioners receiving a British state pension must notify the Department if their British state pension increases for any reason. Eg death of a partner, age increase, temporary or permanent return to Britain.

British Official Public Service/Forces pensions are updated automatically in April each year according to the indexation rate advised by the British government.

Date of Event for Grants and Increases of foreign pensions

Where a pensioner is granted a foreign pension, or receives an increase in foreign pension, the date of event of the change is taken to be the date they received notification of the grant or increase from the foreign pension authority.

Date of Effect for Grants or Increases of Comparable foreign pensions

A comparable foreign pension is any pension paid by another country that is similar in nature to an Australian income support pension, ie what would commonly be called a social security payment, a universal government pension scheme available to residents (or former residents) of the country who have reached retirement age or are unable to work.    

The date of effect of a reduction in service pension or income support arising from a grant or increase in comparable foreign pension depends on whether an arrears payment is received in conjunction with the grant or increase.

Processing arrears of Comparable foreign pensions

Retrospective pension reductions and the raising of overpayments due to the receipt of arrears of comparable foreign pension can be processed by recording the new rate of comparable foreign pension in PIPS from the effective date of the grant or increase. Where there are changes in the rate of comparable foreign pension over the period of the arrears payment, a separate PIPS worksheet must be processed for each change in rate.

If the arrears payment covers  a longer period over which exchange rates have changed considerably, recording the foreign pension rate from the effective date of the change in PIPS may not reflect the actual value of the arrears payment at the current exchange rate. Where this is the case:

• work out the Australian dollar value of the arrears payment at the current exchange rate,
• work out the period to which the arrears payment applies,
• calculate the fortnightly rate of arrears payment in Australian dollars over the period to which the arrears payment applies,
• record the fortnightly rate of the arrears payment in a closed period PIPS worksheet as Other Direct Income for the period to which the arrears payment applies, and
• record the ongoing rate of comparable foreign pension in a PIPS worksheet from the day after the period to which the arrears payment applies.

Date of Effect – Grants or Increases of other foreign income

For grants or increases of foreign income other than comparable foreign pensions, service pension or income support supplement will reduce from either the date of event or the day after the notification period, depending on whether the grant or increase is notified within the notification period.

Example 1 – grant of comparable with arrears payment

• Jack is a service pensioner who is granted a US Social security Pension with effect from 28 September 2009 at a rate of $US178.05 per fortnight
• Jack receives notification of the grant of the pension along with his first regular payment and arrears payment for the period since 28 September 2009 on 1 August 2010.

Jack's service pension is reduced due to the grant of US Social Security Pension with effect from 28 September 2009, that date from which the arrears payment commenced.

• Example 2 – increase in comparable foreign pension with arrears payment
• Jill is a service pensioner who receives a UK State Pension at a rate of GBP 98.07 per fortnight
• On 10 December 2009 Jill receives notification that her UK State Pension ahs increased to GBP 115.32 per fortnight following the death of her partner. She receives an arrears payment backdated to 11 December 2009.

Jill's service pension will reduce due to the increase of the UK State Pension from the day after the Bereavement Period, the earliest date pension can reduce following the date of increase to which the arrears payment refers.

Example 3 – grant of comparable pension with no arrears payment

• Dirk is a service pensioner who knows he will become eligible for a Dutch age pension when he reaches the required age on 5 August 2010
• Dirk applies early and the efficient Dutch pension authorities process his claim and notify him of the outcome on 25 July 2010. He receives his first regular payment of Dutch age pension on 15 August 2010 and no arrears payment.
• Dirk notifies DVA on 10 August 2010 that he will be entitled to a Dutch age pension from 5 August 2010.

As he has notified within the notification period, and he received no arrears payment, Dirk's service pension will not reduce due to the grant of Dutch age pension until 20 August 2010, the day after the notification period.

Example 4 – increase in NON-comparable foreign pension

• Sabrina is a war widow with ISS who also receives a pension from her former employment with British Petroleum of GBP 55.70 per fortnight
• BP work out that Sabrina should have been paid at a higher rate since her grant in 2005. She receives an increase in her pension to GBP 75.18 per fortnight and an arrears payment of GBP 2,614.30.
• Sabrina receives notification of the increase and arrears payment from BP on 15 July 2010. She notifies DVA of the increase on 5 August 2010, outside the notification period.

Sabrina's ISS will reduce due to the increase in BP pension from 15 July 2010, the date of event.