Assessment of income and assets from business structures for Centrelink payments 043-03010000

This topic covers the issues involved in assessing the information provided on financial statements and tax returns. It contains information on investigating and assessing:

• assets - things a business owns
• liabilities - amounts a business owes
• revenue - income received by the business from operating and investments
• expenses - costs associated with operating a business and generating income

There are various documents, provided by customers and their accountants or financial advisors that assist in the analysis of the operations of a business. This topic contains information about the following common documents:

• balance sheet
• depreciation schedule
• profit and loss statement
• livestock trading account
• income tax return and taxation notice of assessment (NOA)

Businesses go through stages of operation, and the assessment of income and assets required in each stage is explained. Some of these stages and/or changes include:

• business being purchased or sold
• business activity commencing or ceasing
• irregular or intermittent business activity
• seasonal or unexpected downturn in business activity

New claims

The date of event (DOV) for a new claim is the claim date where the claim is for:

• a single customer who is not already in receipt of an income support payment or Low Income Health Card (LIC), or
• a partnered customer where neither member of the couple are already in receipt of an income support payment or Low Income Health Card (LIC)

Exceptions:

• For early claims, the DOV is the date of receipt (DOR).
• For LIC New claims, the DOV is the start date of the 8 week income assessment period or the date of business commencement, whichever is later.
• For all other claims, including LIC renewals, the DOV is treated like a change of circumstances.

If there is a change after the claim date, code this change from the date the change happened. See below for more details.

All other change of circumstances

The date of event (DOV) is usually the date that a change of circumstances or notifiable event occurred.

For commencement of a business, the DOV is the date the business started operating. If an existing business is purchased/taken over, the DOV is the date the new owner takes over the running of the business.

If an ongoing business has a change in its circumstances, the DOV will be the date the customer, or the accountant as their agent, became aware of any notifiable change. This will generally occur when the customer or their accountant prepares the annual financial statements used to prepare their annual income tax return. The DOV is the date the financial statement or the business income tax return is prepared or signed, whichever is earlier.

Where financial statements or tax returns are not signed/dated:

• If there is a substantial change, for example, the update may result in arrears or an overpayment, further investigation is required to identify if a notifiable event exists
• If no notifiable event exists, confirm the date the customer or accountant prepared/signed the tax return

If the tax return and financial statements for more than one year were completed on the same day, further investigation is required to identify if a notifiable event exists for a change in circumstances. If there has not been a substantial change in income or assets, there is no notifiable event for a change in circumstances, and only the later of the two financial years should be assessed.

Notifiable events

A notifiable event is the date the customer becomes aware the net income for the business will differ from that recorded. This can be later than the date the actual change occurred as the customer may not immediately know the impact on the income of the business.

Examples of notifiable changes could be:

• The business takes on a large contract and expects to generate more income than usual as a result
• The business owner decides to close one of their two stores as they want to wind-down towards retirement
• During an unexpected pandemic, a café owner is forced to close the cafe and can only sell takeaway food and beverages

These events would only be notifiable changes where it is reasonably expected that the overall income of the business will substantially change.

Customers have 14 days to advise Centrelink of any increased income as outlined in the general notification provisions and exceptions.

The DOR is the date Services Australia first becomes aware of a change in circumstances or notifiable event.

This is usually when the source documents are received, or the agency is notified of the information.

It is important the correct date of receipt and date of event are coded to make sure the correct date of effect is achieved. For more information, see Date of receipt.

Some businesses are assessed using estimates or interim profit and loss statements. The Date of Event (DOV) should be the date that the customer:

• finalised the latest estimate or interim profit and loss statement, and
• became aware of this information

This may be some time after the last day of the profit and loss period. If there is no indication of the date the customer became aware, use the Date of Receipt (DOR) unless it is believed the customer knew about the change to their business income more than 14 days before it was reported.