DATE OF ISSUE: 1 JULY 1994
EARNINGS CREDIT ACCOUNT BALANCE
The intention of this Departmental Instruction is to clarify Department of Veterans' Affairs policy with respect to:
treatment of earnings credit account balance when a pensioner moves from being income tested to asset tested and at a later date subsequently becomes income tested once more; and
whether a pensioner working overseas can access earnings credit previously accrued.
Current policy regarding retention of earnings credit account balance
2.The current General Orders Service Pension (GOSP) chapter on earnings credit correctly states that asset tested pensioners cannot accrue earnings credit. However, the sub-section in the earnings credit chapter titled "Implications for asset tested pensioners" goes on to state that:
"...any credit accrued when the pensioner was income tested cannot be retained if the pensioner subsequently becomes assets tested. The earnings credit commences to accrue from nil if the pensioner becomes income tested again and their income falls below the relevant income free area."
3.The above statement of policy is in fact incorrect and has no legislative basis in the Veterans' Entitlements Act 1986 (VEA).
4.Staff should also be advised that the above-mentioned inaccurate statement of policy was also restated in Departmental Instruction B19/90 (which dealt with Budget initiated changes made to other aspects of earnings credit accrual in 1990).
Correct treatment of earnings credit account balance
5.The correct policy is that any earnings credit accrued by a pensioner whilst income tested is retained if they transfer to the assets test and may be used or added to if the pensioner later returns to the income test.
6.It is important to note that this revised policy is identical to that of the Department of Social Security (DSS) with respect to this matter.
7.Appropriate corrections aimed at removing the above-mentioned error will be made to the Earnings Credit chapter of the GOSP and included in the next available 1994 revision of the GOSP.
8.In addition, the correct policy stated above in this Departmental Instruction overrides the incorrect policy as previously stated in Departmental Instruction B19/90.
Current policy regarding access to accrued earnings credit whilst working overseas
9.The current GOSP chapter on earnings credit (see "Temporary Absence From Australia") states that:
"A credit can accrue during a pensioner's temporary absence from Australia, providing the absence is less than 12 months. However, a pensioner working overseas cannot access credit previously accrued as the scheme only applies to work in Australia."
10.The above statement of policy is also incorrect and has no legislative basis in the VEA.
Correct treatment of access to earnings credit whilst working overseas
11.The correct policy is that income derived by a pensioner whilst working overseas can in fact be offset against accrued earnings credit ie., offsetting is not limited only to earnings derived in Australia.
12.The policy noted in paragraph 9 above does not differ from DSS's currently stated policy with respect to this matter.
13.Again, appropriate corrections aimed at removing the above-mentioned error will be made to the Earnings Credit chapter of the GOSP and included in the next available 1994 revision of the GOSP.
14.The contact officer regarding inquiries related to this Instruction is Martin Dibb - telephone 06-2896706.
MAURIE GALT
ACTING ASSISTANT SECRETARY
INCOME SUPPORT