You may receive income as a lump sum. A lump sum is a one off payment of money.
How we assess a lump sum amount for the income test depends on its nature. Generally, we treat lump sum amounts as income from the date you are entitled to receive the money.
If you receive a lump sum, you need to tell us within 14 days so we can assess it. Otherwise you may be overpaid and have to pay the money back. Even if the money is exempt from the income test, you have to advise us of any resulting change to your assets.
Lump sums exempt from the income test
Some lump sums are exempt from the income test. These lump sums are unlikely to be repeated, cannot be reasonably predicted, and do not represent money paid to you for a service or profit.
Examples of exempt lump sums:
- a one-time gift
- an inheritance
- an irregular superannuation amount, such as commutation of a superannuation pension
- compensation and insurance payouts for damages to property or personal effects
- the value of emergency relief such as financial assistance for floods, bushfires and droughts
- certain redress payments, for example, historical negligence
- a prize, reward or lottery win that is not made in regular instalments
- single or occasional gambling wins if you do not rely on it for a living
- a compensation payment you receive from an Australian trust
Using your exempt lump sum
What you do with exempt lump sums may affect your payment under the income or asset test.
Any amount you spend on an exempt asset such as your home, mortgage, or medical equipment, will not change the value of your assets that we assess.
If you buy non-financial assets, such as artwork or a holiday home, we will assess your purchase as an asset and this may affect your rate of payment.
If you use the lump sum to increase your financial assets, for example, you put it in the bank, loan it, or use it to buy securities or investments, it will be assessed as a financial asset. A notional rate of income will be deemed. If you deposit the lump sum with your superannuation fund, it will not be assessed as an asset if you are under age pension age and have not started drawing on the fund.
Gifting your lump sum may affect your payment. It is your right to give away part or all of your lump sum. However, gifts in excess of $10,000 per year or $30,000 in a 5 year period will be included in your deemed financial assets. If you put the funds into a trust, we will assess whether the income and assets are still yours or whether you have gifted them.
Read more about gifting.
Lump sums included in the income test
The assessment of lump sum amounts that are included in the income test depends on whether they are remunerative or non-remunerative.
Examples of remunerative-lump sums:
- a commission payment
- a bonus
- director’s fees
- leave paid out while you are still employed
- a payment to a professional sports person such as a signing on fee, sponsorship or endorsement payment
- loan arrangements where there is no expectation that the loan will be repaid, in lieu of services performed
If remunerative lump sums are paid regularly, we will assess them over the same frequency. For example, we will assess a monthly commission over the following month.
One off or irregular income will be apportioned for the same period of time that it was earned over, if this is known. For example, a 6 week job where the commission can only be calculated and paid afterwards, is apportioned over the 6 weeks after it is received.
Otherwise, remunerative lump sums will be apportioned over 52 weeks.
Examples of non remunerative lump sums:
- a distribution from a family trust
- a royalty payment
- a grant or scholarship
- a lottery win that is paid as a series of payments under a single contract, for example, win $10,000 a year for life
- a dividend from a private company
- a distribution from a private trust
Non-remunerative lumps sums are apportioned as income from the date of receipt for 52 weeks.