International Social Security Agreements 106-04000000

Australia's social security agreements are bilateral international treaties.

Under the Constitution, the government has the power to decide on policy, sign and ratify treaties and pass legislation through the parliament to give the treaty force in Australian law.

However, general practice is to table agreements in both houses of parliament prior to ratification with a National Interest Analysis (NIA) outlining the reasons why Australia should become a party to the agreement. Treaties are considered by the Joint Standing Committee on Treaties (JSCOT).

Social security agreements are added as a schedule in the Social Security (International Agreements) Act 1999, however, the commencement of an agreement, or entry into force, is determined by an exchange of diplomatic notes between the countries (ratification).

This usually occurs once all processes have been completed and legislation is in place. Agreements usually specify that they will enter into force on the first day of a specified number of months after the exchange of notes occurs.

Agreements are indefinite but may be revised or modified by new agreement. Provisions to terminate the agreement are included, generally after a specified period if either country officially notifies the other through the diplomatic channels.

Transitional provisions are also included to preserve the rights of customers who are paid under the agreement or have lodged a claim prior to any revision or termination.

Agreements generally provide for a separate administrative arrangement which details agreed processes including lodgement of claims and exchange of information.

Administrative arrangements are negotiated at the same time as the agreement but are not usually legal documents and so can be more easily changed without the need to alter the agreement or legislation.

Subsection 6(1) of the Social Security (International Agreements) Act 1999 states that the provisions of a scheduled international social security agreement 'have effect' regardless of any other provision in the rest of the social security law.

The Agreements Act is not the enabling legislation. This means that all the requirements under the Social Security Act 1991 and the Social Security (Administration) Act 1999 still apply to determining entitlements under agreements but the provisions in the agreements may modify discrete elements in those Acts.

For example, under the Social Security (Administration) Act 1999, a person must generally be an Australian resident and in Australia to lodge a claim. If an agreement provides that a person may claim when resident and present in the agreement country, then that agreement provision applies regardless of the requirement in the Administration Act.

A person may only need to use a certain provision of an agreement to be entitled and not the whole agreement. However, when a person uses a provision of an agreement to be eligible, such as, claims under agreements or transfers to agreements, they are considered to be paid 'by virtue' of the agreement and any other provisions of the agreement also apply, such as, specific portability conditions or calculation of the rate of payment.

A person may not need to totalise and may only need an agreement to lodge their claim outside Australia. For example, they have 10 years qualifying Australian residence, have a qualifying residence exemption or were an Australian resident when they met a qualifying event criteria, such as 'continuing inability to work' for Disability Support Pension (DSP) but in an agreement country when they lodge a claim.

Where it is specified in an agreement, certain provisions may also affect autonomous customers without the need to be paid under the agreement. These are normally favourable provisions, such as, some foreign pensions being exempt from the income test or proportionalisation of foreign pensions, see Rate Calculation.

Agreements generally define terms that are used in the agreement. Any term that is not specifically defined in the agreement has the same meaning under each country's domestic legislation.

Terms that are usually defined in agreements include:

• territory - usually the same as domestic legislation but can include or preclude other areas
• benefit - usually includes any additional amounts or increases that are normally paid
• competent authorities and institutions - the government bodies responsible for the policy and administration of the legislation (see below)
• legislation - the various laws that are in scope which may be limited to specific areas of each law generally referred to a separate article called Legislative Scope. For Australia, most agreements include the Superannuation Guarantee legislation. Also referred to as the 'applicable legislation'. See Superannuation, Double Coverage, Taxation and Healthcare
• periods of coverage - generally working life residence (WLR) for Australia and insurance periods for the other country. Also referred to as insurance periods
• other payment specific limitations - such as:
• Carer Payment - usually limited to partners of pensioners, or
• Widowed person - may be limited to previously legally married persons (de jure)

Other terms used in agreements:

• totalisation - the ability to add periods of coverage in both countries to meet minimum periods required to qualify. See Qualification (totalisation and ongoing requirements)
• embargo - the ability for a debt owed to one country to be recovered from an arrears payment from the other country
• double coverage - most agreements include provisions to avoid payment of compulsory contributions in both countries. Also referred to as the 'applicable legislation'. See Superannuation, Double Coverage, Taxation and Healthcare
• administrative arrangements - a separate document containing the agreed processes for administering the agreement. See Administrative arrangements and exchange of information
• liaison - an exchange of information under the agreement usually via an agreed form

Agreements and administrative arrangements generally specify the relevant authorities and institutions that are 'competent' or responsible for the legislation and administration in each country and nominate centralised liaison agencies to administer the agreement.

Competent authority

Generally government agencies, departments or ministries that have portfolio responsibility for the legislation and policy covered by the agreement.

For Australia, the competent authority is the Department Social Services (DSS).

Competent institution

Generally, government departments, agencies or pension funds that have responsibility for service delivery and administration of the legislation.

For Australia, the competent institution is Services Australia.

Liaison agency

Generally, competent institutions or specific sections within the institutions designated to coordinate the exchange the information and process claims.

For Australia, the liaison agency is International Services (CIS).

Agreements generally state who can use the provisions of the agreement in an article called Personal Scope.

For Australia, this is usually any person who 'is, or has been, an Australian resident'.

For the other country, this is usually a person who 'is, or has been, subject to the legislation' of that country, generally meaning a person who has been required to pay compulsory social security contributions but may also include periods of residence in that country.

The laws covered by the agreement are generally included in an article called Legislative Scope. In some cases, the scope is limited to particular areas within a law or laws, for example, for Australia, only relating to Age Pension or, for another country, excluding insurance for civil servants.

For Australia, most agreements include provisions to avoid payment of compulsory contributions in both countries, see Superannuation, Double Coverage, Taxation and Healthcare.

Payments covered by agreements are generally defined in an article called Legislative Scope.

For Australia, all agreements cover Age Pension and many cover Disability Support Pension (DSP). Less often, agreements may include Carer Payment (CP), Double Orphan Pension (DOP) and 'pensions payable to widows' that is, Parenting Payment Single (PPS).

Note: additional child amounts are not separate payments that can be claimed but are part of the rate calculation for some agreements. See Rate calculation.

Some older agreements covered Bereavement Allowance, Wife Pension and Widow B Pension. Although these payments no longer exist, for historical assessments, customers who received these payments may have been able to use an agreement. See, Wife Pension and Bereavement Allowance.

Extra conditions on payments may apply, for example, severely disabled for DSP, CP partners of Age Pension or DSP. Payments may be included, excluded or limited for specific purposes, for example, CP not payable outside Australia.

For the other country, agreements generally cover retirement pensions and most also include invalidity pensions and payments to survivors. However, some may exclude laws covering certain categories of employees, for example, civil servants.

Administrative arrangements usually specify agreed processes and responsibilities for administration of the agreement:

Forms

Forms used in the administration of agreements are negotiated and mutually agreed between the countries. This includes claim forms and liaison forms used to transmit information between countries and medical reports.

Processing of claims

Claim forms are usually lodged with the relevant institution or liaison agency in which the customer resides. Normally, the institution or liaison agency receiving the claim will:

• Verify Identity - Each country usually agrees to accept the other country's Identity Confirmation
• Verify Personal Details - Usually on the basis of information held or on documents provided by the customer, for example, Marriage Certificate to prove legal marital status
• Complete a liaison form - Liaison forms usually include confirmation of periods of coverage in each country and details of any pensions paid
• Send the claim - There are no timeliness standards in agreements but generally include undertaking to send 'without delay'. For disability related claims, existing medical information is usually sent with the claim
• Notification of decision - Once a decision is made, each country will usually notify the other of the result of the claim (reject or grant) on a liaison form

Medical examinations

In addition to existing information sent with claims, additional medical examinations can be requested, including for general medical reviews.

Generally, the country conducting the examination will bear the cost but many arrangements include provisions for reimbursement upon presentation of costs at specified intervals.

Agreements authorise the exchange of information between the countries subject to the legislation in in each country including protection of data. In most cases, agreements allow information to be exchanged for the purposes of both the agreement and each country's domestic legislation. This means that information may also be exchanged about autonomous customers if the information affects their entitlement.

Some agreements apply limitations on the information that can be exchanged. For example, only information that relates to a period after the agreement started or only if the person uses the agreement or authorises the exchange.

Generally, only the liaison agencies or competent institutions specified in the agreement and the administrative arrangements are authorised to exchange information. For Australia, this is always International Services (CIS).

The method of exchange is usually individually on a liaison form sent via normal mail but can be transmitted electronically in some cases.

Bulk exchanges have been agreed with some countries, usually to advise of increases in rates cost of living increases (CPI). See International Data Exchange Program and auto indexation of foreign pensions for more information.

Customers whose payments are not portable for the whole period of their absence outside Australia may be able to transfer to an international social security agreement and continue to receive payment if they go to an Agreement country. Customers must meet any payment specific requirements under the agreement and meet the transfer requirements before they can use an agreement to continue to be paid.

Customers who transfer to agreements are then considered to be paid 'by virtue' of the agreement and any other agreement provisions also apply, such as, specific portability conditions or calculation of the rate of payment.

Customers who are paid under an agreement and who do not need to totalise may transfer to autonomous only if they are an Australian resident and in Australia. A customer who transfers to autonomous may be affected by the former resident provisions if they leave Australia within 2 years of again becoming an Australian resident.

In Australia, the Superannuation Guarantee legislation requires employers to make contributions to a superannuation fund on behalf of employees to plan for retirement. Most other countries' social security systems also include such compulsory contributions usually through automatic deductions from wages or salary.

Early release of Australian superannuation

A person may access their Australian superannuation before retirement in very limited circumstances. Customers should generally contact the relevant superannuation fund, however, for early release of superannuation due to:

• financial hardship or compassionate grounds, see Early release of superannuation on financial hardship grounds
• permanent departure from Australia, refer the customer to the Australian Taxation Office (ATO) website

Refund of foreign insurance contributions

Contact details for foreign pension authorities are available in CODES facility.

Some countries may also allow a person to obtain a refund of their social security contributions in that country. Any queries about refund of contributions in another country must be directed to the social security authority in that country.

Refunds of contributions are generally assessed as ordinary income for 12 months from the date of receipt. See Treatment of lump sums.

For Australia, the Australian Taxation Office (ATO) is responsible for all queries relating to Double Coverage and Certificates of Coverage.

Where a person is resident in one country and temporarily goes to work in another country, the employer may be bound by both countries' legislation and be forced to make contributions in both countries. This is referred to as Double Coverage.

Social security agreements generally include provisions to avoid Double Coverage where one country provides an exemption from the requirement to pay contributions in that country. Also referred to as the 'applicable legislation'.

The relevant authority in each country must agree before an exemption from paying contributions in one of the countries is applied. A form called a Certificate of Coverage is used to confirm exemptions.

Any queries about taxation of pensions or the requirement to lodge a tax return should be directed to:

• in Australia - the Australian Taxation Office (ATO) website
• in the other country - the tax authority in that country

Taxation is not affected by social security agreements so is subject to the tax legislation in each country.

Generally, a person is required to pay tax on their income from all sources in the country in which they are a resident (according to the definition in tax legislation). Non-residents may still be liable to pay tax on income from that country.

This means that, in some cases, the laws of each country may require a person to pay tax in both countries on the same source of income.

For information on taxation of Australian payments in Australia including arranging and changing tax deductions from Australian pensions, see Taxability and tax deductions from payments.

Tax treaties

Australia has agreements with a number of countries which seek to avoid the need to pay tax in both Australia and the other country. These are referred to as Double Tax Agreements (DTA).

Most DTAs allow a person to be determined as resident in only one country for tax purposes. In some cases, DTAs may affect the rate of tax to be paid or allow an offset of tax deducted from one country against the tax payable in the other.

Payment summaries

Payment summaries of Australian pensions are not automatically issued outside Australia. Customers can request a statement if required for tax purposes in another country. See each agreement file for known information on taxation in that country.

The Resources page contains a link to the Australian Taxation Office (ATO) contacts.

Any queries about:

• health insurance coverage in the other country, should be directed to the health insurance authority in the other country
• Medicare coverage, should be directed to Medicare, see Resources for a link

Medicare coverage

Australian residents (Medicare definition) are generally covered by Medicare, including for up to 5 years outside Australia.

Australia also has reciprocal health care agreements with a number of countries, which may help Australian residents with the cost of essential medical treatment in those countries.

Health insurance

Most countries include coverage for healthcare through compulsory social security contributions usually deducted from paid employment. Insurance generally covers sickness, accidents and care and rehabilitation programs.

Residents in a country without any mandatory insurance are usually able to take out voluntary insurance.

To claim an Australian social security payment, a person generally needs to be an Australian resident and in Australia.

Agreements usually allow a person to claim a payment covered by the agreement while resident and/or present in the agreement country. Some agreements also allow a person to claim while resident and/or present in another/third agreement country. See Claim Lodgement Matrix for specific third country lodgement details.

For example:

• A customer who has 5 years qualifying residence in Australia during their working life and 5 years coverage under the German social security system is resident and present in Austria. The customer reaches Australian Age Pension age and lodges a claim for Australian Age Pension with the Austrian authorities but does not have any insurance under the social security system in Austria
• The customer can only use the agreement with Germany to totalise the 10 years required to qualify for Age Pension
• As the agreement with Germany allows claims to be lodged while resident and/or present in Germany or another/third agreement country that accepts claims for Australian pension under another agreement, and the agreement with Austria accepts claims under other agreements, the claim can be lodged
• The customer must also satisfy any other rules under the other agreement and other social security law provisions, including portability. For example, Disability Support Pension (DSP) can be claimed in a third country but has an ongoing residence requirement. Therefore, if the claimant is:
• living in the other country, DSP cannot be paid
• temporarily in the other country, DSP may generally be paid for the period it is portable under domestic legislation

Some agreement countries limit claims to people in that country or may have limitations based on citizenship. Many European countries may also be bound by various European conventions. Agreements generally overcome any restrictions and allow Australian residents or citizens to claim and receive payments on the same basis as resident or citizens of the other country.

Note: the agreements with India and Serbia contain unique lodgement rules. See either India Agreement and foreign pension information or Serbia Agreement and foreign pension information.

Agreements generally provide that the date of lodgement of a claim, notice or appeal in one country may be taken to be the date of lodgement for the purposes of other country. This means that customers are not disadvantaged for administrative or mailing delays. For example, the date a claim for a foreign pension from an agreement country is received by Services Australia, will be used by the foreign pension authority in the agreement country to decide from what date the customer can be paid the foreign pension.

Many agreements also allow a claim for payment from one country to be accepted as a claim for the corresponding payment in the other country. This is referred to as 'claim for one = claim for the other'. For example, the date of lodgement of a foreign 'retirement' pension with an agreement country authority may be taken to be the date of lodgement of a claim for Australian Age Pension. In most cases, conditions are applied before this may take effect, for example, the Australian pension claim must be received in Australia within 12 months of the date of lodgement of the foreign 'retirement' pension.

Periods of coverage for an agreement country are usually contributions paid into the social security system of that country but may include periods of residence or deemed periods, such as, military service or child rearing. Periods of coverage may also be referred to as periods of insurance.

Note: only periods that can be used to qualify for a payment are valid. Contributions or insurance periods that have been paid out as a refund cannot be used.

Periods of coverage for Australia are usually periods of Australian working life residence (WLR). WLR is used by both Australia and the agreement country for different purposes, for example Australian rate calculations or agreement country totalisation for a foreign pension.

The agreement with India has a limit to only use WLR after 16/11/1995 and is further limited in other contexts such as totalisation for both Australian and Indian pensions.

Under the Agreement with New Zealand, both countries, Australia and New Zealand, use working age residence (WAR), which is residence between age 20 and Age Pension age. See Minimum WLR to totalise and Qualification for foreign pensions sections below.

Only the competent institutions in each country can determine periods of coverage as defined in agreements. The agreed administrative arrangements provide for a process for each liaison agency to certify periods that can be used to totalise by the other country. See Foreign liaisons.

For Australia, the liaison agency is always International Services (CIS). For agreement countries, see the 'Authorities, Institutions and Liaison Agencies' section in the relevant agreement country file. Overview contains a link to the agreement files.

In most cases, agreement countries provide:

• an Insurance Period (IP), most often a calendar or financial year but may be an ad hoc date range, and
• an Insurance Value (IV), which is the amount of the contributions or equivalent periods within the IP. This can be in a variety of formats e.g. Years, Months, Weeks or Days

Where the IV equals or exceeds the IP, the IP is considered 'complete'. Where the IV is less than the IP, it is considered 'incomplete'.

To be able to compare, aggregate and totalise with Australian residence, foreign periods and values advised by the agreement country must be converted to totals in Years (Y), Months (M) and Days (D).

Firstly, periods must be stated in full date formats. For example, if an agreement country were to advise a period of coverage of:

• '1985', this would be taken to be 1 January 1985 to 31 December 1985, or
• 'April 2000 to April 2001', this would be taken to be 1 April 2000 to 31 March 2001, or
• 'Quarter 1 2012 to Quarter 3 2013', this would be taken to be 1 January 2012 to 30 September 2013

Then periods and values must be converted:

• an Insurance Period (IP) is converted in the same way as Australian residence giving Y/M/D
• an Insurance Value (IV) may need to have any excess months, weeks or days converted by:
• Weeks (W)/52 = 1 Year (Y), and then
• any remainder Weeks (W) x7 = Days (D)
• any remainder Days (D)/30 = Months (M)
• any remainder Months (M)/12 = 1 Year (Y)

For Australia, where the periods of qualifying Australian residence and periods of coverage in the other country overlap (for example, residing in Australia and paid contributions in the other country at the same time), the periods of coverage in the other country that overlap must be disregarded. Some equivalent provisions may apply to the agreement country but the following policy only applies to Australia.

A period of coverage in the agreement country that is entirely overlapped by Australian residence is disregarded.

Where the period of coverage is only partially overlapped and:

• the Insurance Period (IP) is complete, the period is simply reduced by the overlap
• the IP is incomplete, it is not possible to say where in the period the Insurance Value (IV) was actually made. Policy advice is that there is no overlap in these cases but the total IV included in totalisation cannot exceed the non-overlapped IP

See the Resources page for examples of totalisation for Australian payments.

To qualify for an Australian payment, a person generally needs to have been an Australian resident for a minimum period, for example, 10 years qualifying Australian residence for Age Pension. Most other countries have similar minimum periods of insurance before a person can be paid.

With the exception of the agreement with New Zealand, Australian residence requirements for payments under agreements are determined in exactly the same way as for autonomous claims. Historical Australian residence, that is, residence at any time in a person's life, is used to determine whether a customer meets any minimum periods to qualify for Australian payments.

If necessary, agreements generally allow a person to add together periods of coverage in both countries to meet any minimum qualifying periods for payments, provided the periods do not overlap (for example, residing in Australia and paid contributions in the other country). This is referred to as totalisation.

Contributions or insurance periods that have been paid out as a refund cannot be used to totalise.

Subject to the exclusion of overlapping periods, complete periods use the Insurance Period (IP) to totalise whereas incomplete periods use the Insurance Value (IV) provided.

A person may not need to totalise, for example, they have 10 years qualifying Australian residence or were an Australian resident when they first had a 'continuing inability to work', and only need an agreement to lodge their claim overseas.

Under some agreements, the partner's periods of coverage may be used to totalise with the customer's Australian residence for specific Australian payments, for example, pensions payable to 'widowed persons' under the agreement with Ireland.

For Australia, periods of coverage in an agreement country that are deemed to be Australian periods only applies for totalisation to qualify for payments. Deemed periods do not count as Australian periods when determining the rate of payment.

CP does not have any residence requirements to qualify but is subject to a Newly Arrived Resident's Waiting Period (NARWP). With the exception of the agreement with New Zealand, agreements do not affect the NARWP for CP, see Residence assessment for customers claiming Carer Payment (CP).

Beside normal exemptions, a NARWP only applies to a person who enters Australia after 4 March 1997. The date of entry in Australia is defined as the start date of the person's continuous residence or presence in Australia.

This means a person who is in Australia when claiming under an agreement must still serve the NARWP but a person who is resident and present outside Australia has not entered Australia and does not have a NARWP.

However, agreements generally impose a requirement to have been an Australian resident at some time.

Residence requirements for some Australian payments also include a requirement for minimum continuous periods, for example, 10 years qualifying Australian residence requires a period of 10 years continuous residence or a total of more than 10 years with at least one continuous period of 5 years.

Agreements generally allow continuous periods of coverage in an agreement country to be accepted as continuous periods to be used to meet any minimum continuous requirements for Australian payments. Agreements also generally allow several broken periods of coverage in the agreement country to be deemed to be one continuous period.

Policy advice is that adjoining periods of qualifying Australian residence and periods of coverage in an agreement country (with allowable 3 month gap) may also be considered continuous.

Only complete foreign periods of coverage can be adjoining to Australian residence. For the purposes of adjoining periods, a complete period which is immediately followed by another complete period is considered to be one continuous complete period.

There is usually a minimum period of coverage that is required before totalisation is allowed. This is intended to avoid paying very small rates.

For Australian payments, a person who is not an Australian resident usually requires at least 12 months of Australian working life residence (WLR), of which 6 months is continuous, before they can use the totalisation provisions.

There is generally no minimum WLR requirement for a person who is an Australian resident. This means that a person may arrive in Australia for the first time and use an agreement to qualify for an Australian pension immediately.

• Note: the minimum-to-totalise requirements vary between agreements:
• The agreement with India has a limit to only use WLR after 16/11/1995 and is further limited in other contexts such as totalisation for both Australian and Indian pensions
• Under the agreement with New Zealand, both countries use working age residence (WAR). This is residence between age 20 and Age Pension age, instead of WLR
• The 12-month (6 continuous) requirement applies to customers claiming under the Latvian and Serbian Agreements no matter whether they are Australian residents or not

WLR is defined in both the Social Security Act 1991 and the Social Security (International Agreements) Act 1999. Policy advice is that:

• the definition in the Social Security (International Agreements) Act 1999 only applies when calculating the rate for payments under agreements after grant, and
• WLR is not rounded up when used to meet any minimum WLR required for totalisation

This means that the rounding up of WLR and the provisions for some current or former members of a couple to use their partners WLR in the Social Security (International Agreements) Act 1999 only applies when calculating the rate for payments made under agreements and not when used to meet the minimum WLR for totalisation. See Working Life Residence (WLR) for more information.

After considering any minimum residence periods to qualify, Australian payments such as Disability Support Pension (DSP), Parenting Payment Single (PPS) and Carer Payment (CP) also require a person to be an Australian resident to continue to qualify. That is, if the person ceases to reside in Australia, they are no longer entitled. For PPS, there are also requirements for the dependent child to be in Australia.

Agreements generally include provisions that allow references to Australia to be read as references to the other country and for payments to continue for those who are in and/or reside in the other country. This means that DSP, PPS or CP can continue to be paid if the person is resident and present in the agreement country.

Most other countries also have minimum periods of coverage to qualify for payments from those countries. Under agreements, periods of coverage in the agreement country can generally be totalised with Australian periods, usually working life residence (WLR).

Some agreements modify the Australian periods that may be used in different contexts, for example, historical Australian residence or only WLR during which the person was employed or self-employed may be used to totalise for a foreign pension. The agreement with India has a limit to only use WLR after 16/11/1995 and is further limited in other contexts such as totalisation for both Australian and Indian pensions. Under the agreement with New Zealand, both countries use working age residence (WAR), which is residence between age 20 and Age Pension age.

For agreement countries, usually a minimum period of coverage of at least 12 months is required. Contributions or insurance periods that have been paid out as a refund cannot be used to qualify.

Some countries also have restrictions on claims based on citizenship or nationality. Agreements usually have provisions that overcome these restrictions for Australian citizens or residents of Australia.

See Foreign pension claims.

Proportional Rate

The agreement with India contains unique rules for proportional rate calculation. See India Agreement and foreign pension information.

Most agreements refer to the general rate calculation contained in the Social Security (International Agreements) Act 1999 to determine the rate payable outside Australia.

The agreement with New Zealand uses different rate calculations. See New Zealand Agreement and foreign pension information for more details.

This is normally a proportional rate based on the customer's Australian working life residence (WLR).

The definition of WLR in the rate calculation in the Social Security (International Agreements) Act 1999 differs from WLR used for other purposes such as totalisation. WLR for rate calculations is rounded up. In some cases, the partner's WLR may be used.

Although a person may be qualified for an Australian payment or portable outside Australia, if the customer has no WLR, the rate of payment outside Australia will be nil.

Examples of when a customer is paid a proportional rate include customers who are:

• living overseas
• temporarily overseas longer than 26 weeks
• former resident transferring to an agreement for portability
• Inside Australia agreement customer paid a comparison rate

Additional child amounts - also known as Overseas Child Component and Additional Child payment

In recognition of old family payments components in pension rates, for each dependent child, under the age of 16 and recorded as in the customer's care, additional child amounts are added to the maximum rate of pension before the rate is proportionalised. There is also an extra amount paid if the pensioner does not have a partner. These amounts are paid automatically as a component of the Australian pension if the customer is qualified (s14A SS(IA)A 1999). Some agreements specifically exclude additional child amounts from the rate calculation.

Additional child amounts are indexed annually in line with CPI increases and can be viewed on the Pensions Rate Calculation (PRC) screen in the ADD O'seas Child Comp field.

Proportionalisation of foreign pension

Many agreements provide that, where the Australian rate is proportional, only a proportion of pension from the agreement country is included in the income test. This is sometimes referred to as the Randisi concession (after the Italian negotiator). See Assessment of foreign pension and exempt payments.

Add-ons

When a person is paid a proportional rate under an agreement, Rent Assistance (RA) cannot be paid. Other add-ons such as Energy Supplement and Pension Supplement are payable under normal add-ons portability rules. See Portability of Add-ons.

Rate limiter

As a result of the proportionalisation of foreign pensions, a customer with a high rate of pension from the agreement country and a small period of WLR may receive a higher rate of pension than a person with full WLR because of the income test. The general agreement rate calculation also includes a provision to compare the rate calculated with the concession to the rate that would be paid if the customer had full WLR and the lower of the two is paid. This is referred to as the rate limiter.

Some agreements have a provision for the rate paid under the agreement to continue for the first 26 weeks of a temporary return to Australia. These provisions mean that the rate of payment does not change for short trips.

For temporary returns to Australia, a Manual Follow-up (MFU) activity is created for staff in International Services (CIS) to determine and code whether the return is temporary or not. A separate MFU applies for customers who are paid a special proportional rate under the agreement with New Zealand to determine and code whether the return is long-term.

System processing automatically changes to the inside Australia rate under the agreement after the 26 weeks.

Customers who are paid under an agreement who return to Australia to live are changed to the inside Australia rate immediately. Agreement customers who return to Australia permanently may be able to transfer to autonomous assessment in some cases. See Agreement transfers.

Direct deduction rate

Most agreements specify the rate payable inside Australia is usually a direct deduction rate. All the customer's payments from that country that are covered under the agreement are not assessed as income under the income and asset test, but are assessed as a dollar-for-dollar deduction from the maximum rate of Australian payment before the income and assets tests are applied.

The agreement with New Zealand uses different rate calculations and the direct deduction of the New Zealand pension occurs after the income and asset test has been applied. See New Zealand Agreement and foreign pension information for more details.

Comparison rate

Several agreements have a further provision that compares the direct deduction rate in Australia to the proportional rate outside Australia. If the proportional rate is higher than the direct deduction rate, the higher rate is payable. This is referred to as the comparison rate.

Customers on a comparison rate who are accruing Australian WLR, for example, Disability Support Pension (DSP), should be reviewed every 12 months from the date of lodgement.

Customers inside Australia and receiving a comparison rate on 1 July 2004 are 'saved' (grandfathered) from the 1 July 2014 AWLR changes and have their rate calculated using the 300 month (25 year) denominator.

This 'saving' (grandfathering) continues until the customer:

• leaves Australia, or moves to an Inside Australia (direct deduction) rate, or
• moves to an autonomous assessment, or
• ceases to be entitled to payment

Customers receiving the comparison rate and saved from the 1 July 2014 AWLR changes must have this assessment made manually on the Residence Savings (RSS) screen.

Note: it is important to remember that if a person is paid a proportional rate inside Australia, they can be paid all components of the Pension Supplement, the Energy Supplement, but not other add-ons such as Rent Assistance. However, all other parts of the agreement proportional rate calculation apply, such as additional child amounts and the proportionalisation (Randisi) of the foreign pension in the income test.

Some agreements have a provision for the rate paid under the agreement to continue for the first 26 weeks of a temporary departure from Australia. These provisions mean that the rate of payment does not change for short trips.

This does not affect the portability of payments or add-ons such as the Pension Supplement.

System processing automatically applies these rules.

Note: a manual decision may be required under the agreement with New Zealand.

See Portability of payments paid under International Agreements.

Customers who are paid under an agreement who depart Australia permanently are paid the outside Australia rate immediately.

The rate paid from the grant of an Australian new claim is based on where the customer is present, even if they are a resident of the other country. The temporary departure/return provisions that are applicable under the Agreement do not apply. This is because those provisions preserve the rate the customer is being paid when they travel temporarily outside their usual country of residence. That is, a person must be receiving an Australian pension when they travel for the rate to be preserved under these provisions.

A person who is granted an Australian pension when temporarily outside their usual country of residence does not have a rate on arrival to preserve so temporary departure/return provisions cannot apply.

For example, a person who is living in Germany lodges a claim for Australian pension while temporarily in Australia:

• if granted from a date when they were or are still in Australia, they will be paid the direct deduction rate from grant. The rate will swap to the proportional rate from the date they leave Australia
• if payment commences from a date after they leave after they leave Australia, for example, in the case of an early claim, they will be paid the proportional rate immediately

The rate that is payable to the customer under an Agreement can be seen on the Factors Affecting Rate (PFAR) screen.

Manual rate calculations will be required when the customer and partner are paid under different agreements. See Step 4 in the Non NSS system manual rate coding table.

For steps showing how the system can work out the rate to be coded on the Manual Assessment (MAS) screen, see Step 4 in the Coding and finalising claims under an international agreement table.

The Social Security (International Agreements) Act 1999 states that a payment made under an agreement is not payable outside Australia unless the agreement allows it.

Agreements usually state that payments covered are payable indefinitely in either country. This includes those payments that would cancel if the customer ceases to reside in Australia, for example, Disability Support Pension (DSP), Parenting Payment Single (PPS) or Carer Payment (CP).

Agreements may also refer to paying benefits in a third country for the same period normally allowed for customers leaving Australia. However, many agreements differ in this respect and may impose specific conditions on payment outside both countries, for example, not payable or only payable for limited periods or only if the person remains resident in either country.

Many previous versions of agreements had different portability provisions when that version was in force. Transitional provisions in agreements generally mean that a person who is paid under a previous version of an agreement retains the specific portability provision of that previous version.

A customer paid autonomously, that is, without the use of an agreement, may be able to use an agreement to remain payable if they are in an agreement country when their normal portability period expires and the payment they receive is covered by the legislative scope of that Agreement. This may be:

• immediately on departure from Australia (for example, someone granted as an Australian former resident who is departing Australia within 2 years of being granted) or
• after a particular period (for example someone in receipt of DSP who departs Australia for period in excess of 4 weeks)

See Transfers to international social security agreements for more information.

Proportionalisation of foreign pension - agreement customers

Agreements generally state that when a payment under an agreement is paid outside Australia, the rate of Australian payment is proportional according to how long the person has lived in Australia during their working life (AWLR).

Many agreements provide for similar treatment of their foreign pensions for customers who are paid a proportional Australian rate. This is known as the 'Randisi' concession (after the Italian negotiator) and involves the proportionalisation of the foreign pension from that country before it is included in the income test assessment.

Foreign pensions that are proportionalised using the Randisi concession are always proportionalised over a denominator of 300 months (25 years). This is not the same calculation used for the proportional outside Australia rate of Australian pension. See Resources tab for examples.

The Randisi concession doesn't exist in all agreements. Where it doesn't exist, the full amount of any foreign pension from the agreement country will generally be used in the income test.

Note: under the New Zealand Agreement, defined New Zealand benefits are not generally regarded as income. See New Zealand Agreement and foreign pension information.

See Resources tab for an example of the proportionalisation of foreign pensions for agreement customers.

Proportionalisation of foreign pension - autonomous customers

The Randisi concession, where it exists, generally uses the words 'when paid by virtue of this agreement or otherwise'. This means that the concession also applies to autonomous customers who are paid a proportional rate of Australian payment. For autonomous customers, the concession applies to any foreign pension paid by any country with whom we have a social security agreement if the agreement includes the concession.

The Randisi concession doesn't exist in all agreements. Where it doesn't exist, the full amount of any foreign pension from the agreement country will be used in the income test.

See Resources tab for an example of the proportionalisation of foreign pensions for autonomous customers.

Note: under the New Zealand Agreement, defined New Zealand benefits are not generally regarded as income. See New Zealand Agreement and foreign pension information.

Direct deduction of foreign pension

When a payment under agreement is paid inside Australia, the rate is usually a direct deduction. That is, all payments within the scope of the agreement are not included in the income test but deducted from the maximum rate of payment on a dollar-for-dollar basis. This direct deduction usually occurs as the first step, that is, before any other reduction including the income or assets test.

Note: the direct deduction under the agreement with New Zealand applies at the end of the rate calculation and to customers paid by virtue of the Agreement and autonomous customers. In some cases, pensions from a third country may also be included under the agreement with New Zealand.

Generally, amounts that are treated as a direct deduction because of a provision of an agreement are not included as income in the income test.

Agreements may also specify particular payments, or groups of payments, from the agreement country as exempt from the income test. This may also apply to certain Australian payments in the assessment of pensions from the agreement country.

Most exemptions are generally income tested benefits from the other country that are usually only payable to residents of the agreement country.

These exemptions generally also apply to autonomous customers.

Lump sums maybe a refund of contributions or payout of a small pension.

Assessable lump sums are treated as ordinary income over 12 months from date of receipt (s1073 Social Security Act 1991). See Treatment of lump sums.

Note: if there is no ongoing pension on the Foreign Pension Details (FPD) screen, the Foreign Claim Detail (FGD) screen must be updated to 'FIN-NOM'.

Overpayments due to arrears payments from the grant of foreign pension are able to be raised under s1228A of the Social Security Act 1991. Any recovery methods under the Act are available.

However, many agreements allow one country to ask the other to place a hold on the arrears amounts to be used to recover their debt. This is referred to as an embargo.

Note: for the purposes of embargo provisions, the definition of payments is usually extended to include all income support payments.

Embargoes may be direct or indirect.

Direct embargo means the entire arrears amount is sent to the other country. That country then recovers their debt from the arrears amount and sends the remainder, if any, to the customer.

Indirect embargo means a country must first specify the amount of the debt. The country that holds the arrears then sends only that amount to the other country and the remainder, if any, to the customer.

Each country uses their own exchange rates to convert amounts to their currency. This can lead to small differences between amounts requested and amounts received.

For example, Australia requests an embargo of AUD$1,000 from an agreement country. That agreement country converts the Australian dollar (AUD) amount to their currency and sends that amount of foreign currency. When received, Australia converts the foreign currency back to AUD, which is then AUD$900.

Policy advice is that, provided a country sends the amount requested as converted using their exchange rates, the customer debt is considered fully repaid regardless of any difference.

Only the agreement with New Zealand allows more general overpayments from one country to be withheld from ongoing payments from the other country. See New Zealand Agreement and foreign pension information for more details.

Each country is responsible for reviews and appeals in accordance with their own domestic policy and procedure. However, agreements generally allow the date of lodgement of a notice of appeal in one country to be taken to be the date of lodgement for the purposes of the other country.

The relevant administrative bodies in each country will usually facilitate the copying and transmission of any documents associated with a review or appeal in the other country. See Reviews and Appeals procedures for Agreement decisions.