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.
When to tell us if you get a lump sum
If you get a lump sum, you need to tell us within 14 days of getting it. 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 also need to tell us about any changes to your assets.
What counts 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 you've received it as a payment for your services.
How we treat them in the test
If it’s a regular sum we assess it on the same timeline. For example, a monthly commission counts in your income test for the next month.
If it’s not a regular sum, we look at how long it took you to earn it. For example, if it’s commission at the end of a 6 week job, we spread the amount over 6 weeks. That’s after you get it.
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.
What doesn'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.
- a one off gift
- a one off amount of superannuation
- an inheritance
- 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 lottery win
- a gambling win unless this happens often or you gamble for a living
- compensation from an Australian trust.
When lump sums may still affect your payment
What you do with lump sums may affect you under the income or assets test. It doesn’t matter if the lump sum is exempt.
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 principal 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
We use deeming rules to work out income from your financial assets. This applies if you use the lump sum you get to buy or add to financial assets. The deemed income counts in the income test. The assets may also count in the assets test.
Deeming rules lump sums will count in the income test if you’re:
- 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.
Lump sums 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 lump sums
You can give away all or part of your lump sum. But anything over the gifting limit counts in the assets test and will have deeming rules applied under the income test through deeming. The limit is a total of:
- $10,000 in one financial year, and
- $30,000 in 5 financial years – this can’t include more than $10,000 in any year.
For example, if you gift $10,000 in one financial year, you have reached the limit for that year. If you gift $10,000 each financial year for 3 years within a 5 financial years, you have reached the limit.
If you put the money into a trust, we may treat it as a gift. It depends on who has control of the trust.