Lump sums while on income support

A lump sum is a one off amount of money. Lump sums can count in your income test. If so, they may affect your payment from us.

Tell us if you get a lump sum

You need to tell us within 14 days after you get a lump sum. If you don’t, we may overpay you. If this happens you’ll have to pay us back.

You must tell us about any lump sum you get, even if you think it’s exempt from the income test. You need to also tell us of any changes to your assets.

Lump sums that count in the income test

Generally, lump sums count as income from the date you can get the money.

There are 2 types of lump sums: remunerative and non remunerative. We treat them differently in the income test. 

Remunerative lump sums

These are in return for something you’ve done. They include:

  • a commission payment
  • a bonus
  • director’s fees
  • leave payouts from your employer while you're still employed
  • a signing on fee, sponsorship or endorsement payment to a professional sports person
  • a loan you don’t need to pay back because it’s instead of payment for your services

How we treat them in the test

If it’s a regular sum we assess it on the same time line. For example a monthly commission counts in your income test for the next month.

If not, we look at the length of time you earned it over. For example if it’s commission at the end of a 6 week job, we spread the amount over 6 weeks after it is received.

If we can’t do that, we spread the amount over 52 weeks.

Non remunerative lump sums

These include a:

  • distribution from a family trust
  • royalty payment
  • grant or scholarship
  • series of payments for a lottery win, for example, if you win $10,000 a year for life
  • dividend from a private company
  • distribution from a private trust        

We spread these amounts over 52 weeks.

If the Australian Taxation Office (ATO) decides to tax your lump sum it may affect your family assistance payments. This is because those payments depend on your adjusted taxable income.

Lump sums that don’t count in the income test

Lump sums may be exempt from the income test if they’re:

  • unlikely to happen again
  • hard to predict
  • not for a service
  • not profits

They include:

  • a one off gift
  • an inheritance
  • a one off amount of superannuation
  • a payout for damages to property or personal effects
  • flood, bushfire and drought assistance
  • some redress payments, such as for negligence
  • One off payments for a prize, reward or a lottery win 
  • a gambling win unless this happens often or you gamble for a living
  • compensation from an Australian trust

When they may still affect your payment

Even if the lump sum is exempt, what you do with it may affect you under the income or assets test.

Buying or paying off assets

If you spend the money on an exempt asset it won’t affect you under the assets test. This includes your main home, mortgage, or medical equipment.

If you buy a non financial asset it will count in the assets test. This includes things like art work or a holiday home.

Buying or adding to financial assets

If you use the money to buy or add to financial assets, a notional rate of income is calculated using the deeming provisions. The deemed income counts in the income test. It may also count in the assets test.

This includes:

  • putting the money in the bank
  • lending it
  • using it to buy securities or investments
  • putting it in your super fund if you’re over age pension age

It won’t affect your income or assets test if you put it in a super fund if:

  • you’re under age pension age and
  • you haven’t started drawing on the fund

Gifting

You have the right to give away all or part of your lump sum. But anything over the gifting limit counts in the assets test and also in the income test through deeming. The limit is a total of:

  • $10,000 in a financial year
  • $30,000 over 5 financial years;

If you put the money into a trust, we may treat it as a gift. It depends on who has control of the trust.

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Page last updated: 8 August 2017