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

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

DOV for the:

• commencement of a business, is the date the business started
• purchase of a business, is the date the new owner takes over the running of the business

For a new claim, the DOV for a:

• partnered customer where their partner is a current Centrelink customer, is the date of the change. This includes the provision of estimates or interim profit and loss statements that a customer provides to support their claim
• single customer, or partnered customer where the partner is not a current Centrelink customer, is the date of claim grant

Exception: for early claims, the DOV is the date of receipt (DOR).

If there is a change after claim grant, code this change from the date the change happened.

If a 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 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.

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.

The customer has 14 days to advise Centrelink of any increased income as outlined in the general notification provisions.

Estimates or interim profit and loss statements

Some businesses are assessed using estimates or interim profit and loss statements. The 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 DOR unless it is believed the customer knew about the change to their business income more than 14 days before it was reported.

Changes to business income

When the customer has increased net income from a new enterprise or contracts that commenced during the year, there may be an overpayment. However, the notifiable event is the date the customer becomes aware the net income will differ from that recorded. This will be later than the date the source of the new income commenced, as the customer will not immediately know the profitability of the new enterprise.

Note: customers can hold investments in public companies for example, shares, futures, options, warrants and derivatives. Treat Shares in listed and unlisted public companies as financial investments. Public companies are not assessed as business structures that require financial statements.