Assessment of employment income for Centrelink payments 108-07010000

For the assessment of these allowances, see Allowances paid with employment income.

For verification purposes, payslips should indicate a breakdown of normal wages, any allowances and what the allowances are for. If only a gross amount is shown, the customer must supply written confirmation from their employer providing details of the allowance. A letter from the employer or a phone call to the employer can also verify income details.

If a customer assigns all or part of their employment income to another person, the amount assigned is the customer's employment income is treated as employment income for social security and ABSTUDY purposes.

Example: The income may be assigned to the landlord or landlord's agent.

If the customer has received back pay of employment income, see Treatment of lump sums.

Employment income may be continuing, when a customer works a fixed number of hours at a given rate of pay.

Unless an exception is met, the customer (and/or their partner) must be placed onto statement reporting to report their continuous income.

See Recording and correcting employment income details for more information.

If the customer needs to report, they must advise any changes:

• using their Centrelink online account or Express Plus Centrelink mobile app
• by phoning the Income Reporting line between 8.00 am and 5.00 pm on their regular reporting day, see the Resources page for a link to Centrelink phone numbers on the Services Australia website
• in person at a service centre using the self service terminals or speaking with a Service Officer who will record their reporting information

Genuine attempts must be made to transition customers to report via self service options before assisted reporting is completed, unless an Exception applies.

If employees have no choice over whether or not their employment income was deferred, the income is not assessed until it is paid.

Example: If there was a change to the award and the employee could not be paid the employment income until they resigned or until they took leave in the future, income is not assessed until the employee leaves the job or is paid the leave.

An employee may earn money but choose to defer receipt of the money. As the customer has an entitlement to claim the employment income before it is received, the income is assessed at the time it is earned rather than the time it is received.

Deferred salary schemes operate in two ways:

• An employee may take a reduction in salary on the basis they will be entitled to leave several years later
• The person can 'purchase' additional leave each year by having 'leave without pay' deductions made from each fortnight's salary

Director’s fees are assessed as employment income as they are received for remunerative work performed. Director’s fees may be paid to:

• Family members of a family business
• Directors or shareholders of a company
• Beneficiaries of a trust
• Members of a board

Wages or other payments in return for remunerative work performed may be paid to a customer by a private trust or a private company they are involved in. These payments are also treated as employment income.

If director's fees or other employment income is paid:

• periodically, they are assessed as ordinary employment income and coded with frequency IOP or LOP from the date paid, for the period they represent. See Recording and correcting employment income details
• as a lump sum, they are assessed from the entitlement period start date of the period in which they are paid for the period they represent, see Treatment of lump sums

These payments should only be recorded using continuous income frequencies if either the 1WE or 2WE exception or Pension Monthly Exception (MTE) Rule are met.

If recording a continuous income frequency for a lump sum paid prior to 7 December 2020, see Recording and correcting employment income details for instruction on how to convert this to variable income.

When to refer to a Complex Assessment Officer (CAO)

Employment income paid to a customer who is involved in a private trust or private company is a deduction which may be claimed against business income for a private trust or private company. Changes to employment income paid may indicate a change of circumstances for the private trust or private company, which needs to be reviewed by a CAO.

• If a private trust or private company record is not linked to the customers record and the customer and/or their partner have received employment income:
• Code the employment income
• Place the customer (and/or partner) onto statement reporting
• Request customer (and partner, if applicable) tax returns, entity tax returns and financial statements along with a completed MOD PC or MOD PT form
• See Identifying and making suitable referrals to the Complex Assessment Officer (CAO) to create a referral to a CAO
• Document the action taken on the customer's record
• If the net income of the business will be different from the information being used in a current assessment due to changes in employment income paid:
• Code the employment income
• Place the customer (and/or partner) onto statement reporting
• Request customer (and partner, if applicable) tax returns, entity tax returns and financial statements and profit and loss statement, if applicable
• See Identifying and making suitable referrals to the Complex Assessment Officer (CAO) to create a referral to a CAO, ensure details of the change in circumstances are documented
• Document the action taken on the customer's record

When employment income is paid in advance, the gross advanced amount is recorded as income from the date it is actually paid.

If the full pay period is paid in advance, the period to which the income relates is the actual pay period.

If a partial advance of the full pay period is paid, the period to which the income relates is the equivalent days worked for the amount, partial days are counted as one day:

• If a partial advance of a full pay period is paid, any remaining gross income which is not paid in advance is recorded as income from the date it is paid
• The period to which the remaining income relates is the full pay period as normal

Note: if there are other regular amounts paid in the same entitlement period as the amounts paid in advance, review the instructions in Multiple pays received in a single entitlement period.

See Recording and correcting employment income details for help with recording details.

An honorarium is either an honorary reward for voluntary services or a fee for professional services voluntarily performed.

• If honoraria are paid as a reimbursement of expenses incurred in performing the volunteer work, see Allowances paid with employment income for details of how to assess income paid to cover expenses
• If the amount paid is greater than the expense amount, the extra is considered assessable income
• If honoraria are paid in recognition of volunteer work performed and not to cover an expense incurred, the income is assessable
• The income is assessed from the Entitlement Period Start Date (EPSD) of the period in which the income is paid, for a length of time equal to the period for which it was paid
• For amounts paid as a remunerative lump sum, see Treatment of lump sums
• For amounts paid as periodic income, see Recording and correcting employment income details

If an employee receives an incentive payment from their employer, such as an incentive payment to get vaccinated, the amount is treated as employment income for a period equivalent to the period that it is paid for.

This is because the amount is not related to a work expense and the employee has full discretion to use the funds for their own personal use or benefit.

From 30 March 2020 to 28 March 2021, Eligible employees received JobKeeper Payment paid to them by their employers.

JobKeeper Payments paid to a customer as an employee are employment income and are eligible income for Work Bonus and Working Credits.

Customers who were self-employed, and received JobKeeper Payment through their sole trader or partnership business, had the JobKeeper payments included in the assessment of their business income.

For specific information in regard to the assessment of JobKeeper payments, where the query does not relate to a compliance investigation, contact the Income Support Means Test Team.

The treatment of leave and termination payments will depend on the customer’s circumstances, including the payment they receive.

For the assessment of leave and termination payments, see Leave and termination payments paid by an employer.

Employment income paid to a prisoner's dependants is regarded as employment income for assessment purposes. This may affect the rate of the partner's payment.

Work release from prison helps the prisoner contribute towards the cost of their upkeep and maintenance of their family. Prison authorities usually decide how much of the prisoner's employment income is given to the prisoner's family.

Although prisoners may go out to work each day, partnered people in this situation are still legally in prison. Their partners are still qualified for their payments, such as Parenting Payment Partnered, subject to all other eligibility criteria.

Long term prisoners granted approved study leave attend educational institutions for lectures, reading and research, and in some cases, live at work release hostels. During vacations, they are encouraged to seek part-time or casual work. Those who obtain work must contribute to their expenses and fees and may also contribute to the maintenance of their family.

These amounts usually represent the division of profits often related to a period of previous employment. Generally, the nature of the employment relationship is that of employer/employee, that is, the customer is neither self-employed nor involved in a partnership or business. This type of arrangement is commonly associated with seasonal industries, such as cray fishing and pearling.

For more information about profit sharing, see:

• Assessing income and assets from profit sharing, and
• Treatment of lump sums

Any amount of salary voluntarily sacrificed into superannuation is income for social security purposes for all income support payments and claims for Low Income Health Care Cards (LIC).

Defence personnel receive a payment called 'Service Allowance'. This is listed separately as an annual amount on their payslip. This is paid in lieu of overtime and is assessed as employment income.

In NSW, non-teaching support staff (teachers’ aides, library assistants or other non-teaching staff), are employees of the NSW Department of Education. As they are unable to work during term breaks, they receive a stand down payment, which is based on them meeting certain criteria.

Stand down payments are not and have never been considered as leave payments for Social Security Purposes. Before 20 April 2010, stand down payments were assessed as a remunerative lump sum and held for a 52 week period from the date the customer received it. From the 20 April 2010, these payments are assessed as ordinary employment income.

If a self-employed contractor or sub-contractor is without a contract and unemployed, Services Australia does not need to consider business income, as the customer currently has no work and no employment income. When they do have work, generally the work can be classified in one of two ways:

• As an employee: The customer gets casual employment where they are an employee. They work for an employer and are paid an hourly or daily rate. They do not need to provide materials or use their own equipment to do the work. In this case, the customer is treated as a casual employee. The customer declares their employment income on their Reporting Statement and the gross amount is assessed under section 1072 of the Social Security Act 1991, that is, with no allowable deductions
• As a self-employed contractor or sub-contractor: The customer is contracted to undertake a job for which they provide the material and equipment and are responsible for providing a service rather than just labour. In these cases, the agency must be rigorous in establishing the customer is still unemployed and this is not part of an ongoing pattern of contract/sub-contract employment; if the latter, the customer would stop to qualify for JobSeeker Payment for example

If satisfied this is just a one-off, short contract for a small job, there is some discretion to treat the customer as still unemployed. In these cases, the customer is operating as a contractor/sub-contractor, that is, self-employed rather than an employee. Therefore, income from the contract is treated as business income, and allowable deductions would apply as per section 1075 of the Social Security Act 1991.

For the assessment of these allowances, see Allowances paid with employment income.

For verification purposes, payslips should indicate a breakdown of normal wages, any allowances and what the allowances are for. If only a gross amount is shown, the customer must supply written confirmation from their employer providing details of the allowance. A letter from the employer or a phone call to the employer can also verify income details.

Sometimes customers may have employment agency fees deducted from their after tax income or they may have to pay an agency a percentage of their gross employment income. If so, agency fees must be treated like any other employment expense and be included in the customer's gross employment income used for social security purposes.

Sometimes employment agencies will have a contract with the employer and their fees are negotiated with the employer. The fees are deducted before payment of the customer's income and deduction of tax. These fees must not be included in the customer's gross income.

Example 1: A customer, who uses an agency to obtain casual employment placements as a nurse with a number of hospitals, may be charged a fee for every placement the agency provides. The fee is deducted from the after tax income of the customer and must be included in the customer's gross employment income.

Example 2: An employer negotiates a fee with a labour hire agency to provide five labourers for a local building site. The fee is paid per labourer. The customer receives an amount representing wages only and tax is deducted from this amount. The gross income of the customer is the amount paid before tax is deducted. The agency fee is not included in the customer's gross employment income.

Deductions from wages to cover cash register/cash float shortfalls, whilst not allowable deductions in the usual sense, can be excluded from gross income if:

• the customer's employment agreement includes an arrangement for deduction of cash register/cash float shortfalls from their wages, and
• there are records of all such deductions on payslips or other correspondence provided to the customer from their employer if verification of the amounts is needed in the future

If the customer is ever repaid money previously deducted for cash register/cash float shortfalls, the amount paid by the employer should be:

• reported in the reporting period in which it was paid as employment income, and
• assessed using the LOP code for 52 weeks

If a customer has performed work but there is a dispute about who is to pay the wages, the customer may not be paid for the work performed. The unpaid wages are not counted as income until the customer is paid income for that period.

Example: Bob is a sub-contractor who employs Harry, thinking that Harry will be paid by Big Builders Pty Ltd. (as this has been the usual practice to date). When Harry has completed the work, Big Builders and Bob both deny they are liable to pay Harry. Harry receives no payment and must take legal or administrative action to prove entitlement to wages. In the meantime, the unpaid disputed wages are not assessed as income for Harry.

If a customer receives free accommodation or free board and lodging, the value of the accommodation or board and lodging is not income for social security purposes. This includes free accommodation provided by an employer or provided to a minister of religion.

Exception: If an employer or other organisation pays mortgage repayments on a customer's property, the value of the payments is assessed as income. The income support system is not intended to help customers acquire assets.

A minister of religion under a contract for service is neither an employee nor self-employed, but is a 'holder of a religious office'. A number of allowances and reimbursements of ministry related expenses may be deducted from the minister's gross employment income, but fringe benefits which are for the minister's own private benefit are valuable consideration, see Item 6 in Table 3, and must be included.

For details about fringe benefits assessment for social security purposes, see Assessing fringe benefits for Social Security income test purposes.

For more information, see Assessing income and assets for ministers of religion.

Periodic compensation is not employment income. It may be paid by employers with employment income. If wages have a component for periodic compensation, the compensation component must be recorded on the Periodic Payment Details screen.

For partnered customers, receiving Family Tax Benefit (FTB) and/or Child Care Subsidy (CCS), and receiving a social security pension or benefit, it may be appropriate to update their family estimate if employment income is updated under the following conditions:

• neither the customer nor partner has updated the family estimate on that day or within this contact
• the customer or partner is making a personal contact (that is, source is personal or phone)
• if the partner contacts to provide new income details for income support purposes and could reasonably be expected to provide an estimate

The Family Income and Choices workflow is to be launched. After completing the Earnings and reporting workflow update the income estimate if the customer has agreed to update the income estimate, See Recording and correcting employment income details.

Pay and allowances to a member of the Naval Reserve, Army Reserve or Air Force Reserve is legislated exempt income, other than pay and allowances for continuous full-time service. See Defence Force Reserves as an approved activity for details.

For details about fringe benefits assessment for social security purposes, see Assessing fringe benefits for Social Security income test purposes.

If a customer receives a gift in lieu of money for work performed, the value of the gift is treated as employment income for social security purposes. Gifts must be given a monetary value under the principle of valuable consideration, see Item 6.

An industry based lump sum payment may be conditional upon the customer discontinuing any involvement in that industry. Lump sum amounts may be paid to a customer because of their association with a particular industry. For example, payments under the Pork Producers Exit Payment.

Consideration will need to be given to whether the lump sum is remunerative or non-remunerative, see Treatment of lump sums. Generally, because receipt of the income is tied to a person’s (past) employment, amounts are considered remunerative.

If an amount is paid not in respect of a particular period, see Recording and correcting employment income details.

Exception: Some industry based lump sum payments are not treated as income as they have a section 8(11) exemption, usually granted on the basis that a recipient needs to exit an entire industry. For example, a dairy farmer must exit farming, not just dairying.

Commonwealth and State governments may provide payments from schemes with similar names. To avoid incorrect assessments, obtain the scheme's full name and the government involved.

Remuneration for professional sport is assessed as employment income in the fortnight in which it is paid, and attributed over the same period of time as it took to earn the amount.

The following types of income are treated as a remunerative lump sum where sport is the person’s main source of income:

• A signing on fee
• payment for endorsement or sponsorship
• seasonal/conditional incentive/bonus
• a professional prize/award

Income is assessed for a number of days equal to the period that the payment represents from the start of the entitlement period in which it is paid, see Treatment of lump sums.

Exception: if a sporting prize/award is won by someone whose main source of income is not sport, the prize/award is a windfall gain and not assessed as income, see Assessment of income for Centrelink payments.

For information on salary sacrifice, see Assessing salary sacrificing/salary packaging arrangements for employment income

Valuable consideration received by a customer in lieu of wages is treated as employment income.

Giving an item: If an item is given to a customer, as valuable consideration, the normal cost of purchasing that item is assessed as employment income for the 12 month period from the date the item is received. For example, if a television is given to a customer, the purchase price is assessed as employment income.

Hiring or leasing an item: If an item is provided for a customer's use, the lease or hire fee is assessed as employment income for the duration of the lease or hire agreement. For example, if the television is leased or hired for the customer, the lease or hire fee is assessed as employment income.