Income for an independent contractor and commission income 043-03050030

If the source is already known and the customer is advising of:

• new contract or commission income, go to Step 3
• updated contract or commission income, go to Step 2

Has the customer previously been determined to be an employee or self-employed?

• Yes:
• an employee, go to Step 3 in Table 2
• self-employed, go to Step 2 in Table 2
• No, go to Step 3

Is this a new claim?

• Yes, go to Step 4
• No, go to Step 7

If the customer received income from:

• work as a contractor, go to Step 5
• commission, go to Step 6

If the customer does not have a current contract and is prepared to look for work outside of their trade area, they meet the mutual obligation requirements guidelines for JobSeeker Payment (JSP) or Youth Allowance (YA) (job seeker). The customer would be considered as unemployed.

If the customer does have a current contract, determine if the customer meets the:

• characteristics of self-employment, or
• characteristics of an employee

Assess if any waiting periods apply.

When contract information is provided and the employment status (that is, self-employed or employee) is determined, go to Step 1 in Table 2.

For customers who received income on a commission basis before claiming, and will continue to receive commission income, determine if the customer meets the:

• characteristics of self-employment, or
• characteristics of an employee

Assess if any waiting periods apply.

When the employment status of the customer is determined, go to Step 1 in Table 2.

For customers currently in receipt of payment who advise they are starting or have started employment on a contract basis or are now receiving commission income, determine if the customer is self-employed or an employee. Ask the customer if they consider themselves self-employed or an employee.

If it is unclear, use the Decision Support Tool.

Consider if the customer's employment situation meets the:

• characteristics of self-employment, or
• characteristics of an employee

If the customer is a minister of religion, they are not self-employed and cannot claim business deductions from their income. However, any reimbursement of expenses, for example books, phone and petrol, is disregarded when calculating income. See Assessing income and assets for ministers of religion.

If unable to determine whether the customer is an employee or self-employed, ask the customer to supply documentation for use in determining the characteristics of the arrangement.

Record all details of contact on a DOC.

If the customer's employment status is determined as:

• self-employed, go to Step 1 in Table 2
• an employee, for:
• contract income, go to Step 3 in Table 2
• commission income, go to Step 4 in Table 2

If the customer is self-employed:

• issue a:
• Business Details (MOD F)
• Real Estate Details (MOD R) (only if the business owns real estate)
• record all details of contact on a Note or DOC

When the customer returns the form/s, continue with this procedure.

If the customer's contract for services is part of their business, treat the contract income as business income.

If the customer's contract for services is a one-off occurrence and income is received as a lump sum, the Net contract income is treated as a non-remunerative lump sum, see Treatment of lump sums.

If the customer receives commission income, the net commissions are treated as business income.

Commission or contract payments received by self-employed customers may be reduced by the costs of obtaining the income as for businesses. To assess allowable deductions, see Business deductions.

For commission workers considered to be self-employed, go to Step 5.

For contract workers considered to be self-employed, go to Step 6.

If contract income is received by employees periodically, as a wage or retainer, or as a lump sum, treat the commission income as employment income:

• Record the income on the Employment Income Paid Details (EAPP) screen using the Employment Type code 'Earnings from Employment’ (EAR)
• Use the frequency ‘Income for one period’ (IOP) or ‘Long Period’ (LOP) to record the income using the date paid as the event date
• For income recorded with the LOP frequency, Start Date and End Date fields must be used to record the pay period
• When a LOP frequency has exceeded 20 years (or greater than 7,300 days) in length from the start date to the end date, refer to an APS5 of above (through usual referral channels) to update this
• See Treatment of lump sums for more details about recording remunerative lump sums
• The income is assessed from the EPSD of the period in which the payment was paid, for a number of days equal to the period that the payment represents or for the length of the entitlement period (whichever is longer). This is the known as the assessment period
• See Recording and correcting employment income details for assistance with coding the EAPP screen

The table on the Resources page explains how to assess commission income for employees after 7 December 2020.

No deductions can be made for expenses.

Note: when an employee, such as a taxi driver, has takings including Goods and Services Tax (GST), the amount of GST is not considered income if the amount is remitted to the Australian Taxation Office (ATO). This is similar to the treatment of business income where GST is forwarded to the ATO.

For customers who are commission workers and regarded as employees, use the Earnings and Reporting workflow to add new, edit, or update income details.

If the Earnings and Reporting workflow is not available, code manually on the Employment Income Paid Details (EAPP) screen.

If the employee is paid an advance of a future commission, a review of their contract should determine if the advance is a repayable loan - no income is assessed if it is a loan.

If SAC (Sales Commission) employer details are already recorded, multiple instances of new commission income can be recorded against the same employer.

If employer details are not already recorded, add a new employer and code the following fields:

• Type: key SAC (Sales Commission)
• Description: the source of the commission (free text)

If commission income is received by employees periodically, as a wage or retainer or as a lump sum, treat the commission income as employment income:

• Record the income on the Employment Income Paid Details (EAPP) screen using the Employment Type code 'Earnings from Employment’ (EAR)
• Use the frequency ‘Income for one period’ (IOP) or ‘Long Period’ (LOP) to record the income using the date paid as the event date
• For income recorded with the LOP frequency, Start Date and End Date fields must be used to record the pay period
• When a LOP frequency has exceeded 20 years (or greater than 7,300 days) in length from the start date to the end date, refer to an APS5 of above (through usual referral channels) to update this
• See Treatment of lump sums for more details about recording remunerative lump sums
• The income is assessed from the EPSD of the period in which the payment was paid, for a number of days equal to the period that the payment represents or for the length of the entitlement period (whichever is longer). This is known as the assessment period
• See Recording and correcting employment income details for assistance with coding the EAPP screen

Record a DOC or Note on the customer record.

Procedure ends here.

Where the income forms part of the person’s regular business income, assess the income as part of the normal self-employment assessment. See Assessment of income and assets from business structures for Centrelink payments.

Where the income is a one-off occurrence record the income on the Other Income (OIN) screen and assess for a period of 52 weeks.

The date of event (DOV) is the date a change of circumstance or notifiable event actually occurred.

The Other Income Summary (OINS) screen will only assess a single amount of income from each particular employer or other income source. Each new date and amount recorded overrides the previously recorded amount. As lump sums can be apportioned up to 52 weeks, each time an individual lump sum is received, it must be added as a new employer with a unique Employer Name/Description to remain on OINS for the full relevant period.

Check to ensure any old income coded previously on OIN using an ongoing assessment code, for example, MTH, ANN, etc. have been removed at the end of the assessment period.

Code the following fields on the OIN screen:

• Type: key 'ROC' (Royalty or Commission)
• Description: key the source of the commission business or royalty income - free text. If the customer receives lump sums from a number of contracts with the same company within a 12 month period, a unique Description needs to be used for each instance of contract income. For example, code as Porter's Homes 12/09/16, Porter's Homes 26/09/16, Porter's Homes 10/10/16, etc., using the date of event of the payment
• Event Date: key the date the commission was paid
• Amount $: key the net commission/royalty paid (gross amount received less allowable expenses incurred)
• Freq: key 'ANN'
• See Recording other income on the Other Income (OIN) screen for assistance coding the OIN screen

Go to Step 7.

Where the income forms part of the person’s regular business income, assess the income as part of the normal self-employment assessment. See Assessment of income and assets from business structures for Centrelink payments.

Where the income is a one-off occurrence record the income on the Other Income (OIN) screen and assess for a period of 52 weeks.

The date of event (DOV) is the date a change of circumstance or notifiable event actually occurred.

The Other Income Summary (OINS) screen will only assess a single amount of income from each particular employer or other income source. Each new date and amount recorded overrides the previously recorded amount. As lump sums can be apportioned up to 52 weeks, each time an individual lump sum is received, it must be added as a new employer with a unique Employer Name/Description to remain on OINS for the full relevant period.

Code the following fields on the OIN screen:

• Type: key 'OTH' (other income)
• Description: key the source of the income. (If the customer receives lump sums from a number of contracts with the same company within a 12 month period, a unique Description needs to be used for each instance of contract income for example code as George's Services 12/09/16, George's Services 2, George's Services 3, etc. using the date of event of the payment)
• Event Date: key the date the income was entitled to be received
• Amount $: convert an annual rate of income for the net lump sum amount (income less allowable expenses) of the contractor income. For example, if the net income was $3,000 for 3 months of work, an amount of $12,000 would be recorded
• Freq: key 'ANN'
• See Recording other income on the Other Income (OIN) screen for assistance coding the OIN screen

Go to Step 7.

If commission is to be held for a lesser period, a review needs to be coded to remove the commission income from the customer's record.

After coding the commission or contract details on the OIN screen, code a manual review to remove that income assessment. For example, if the commission was received on 1 May 2020 and the commission is to be assessed for 6 weeks, the review should be set for 12 June 2020 to zero off the income at the end of the 6 week period.

Check any income coded previously using an ongoing assessment code, for example MTH, ANN, etc. on OIN has been reduced to $0 from the end of its assessment period. In Customer First, create a manual review on the Review Registration (RVR) screen and complete the fields as follows:

• Service Reason: customer's payment type
• Review Reason: INC (Earnings Review)
• Due Date: end of the assessment period determined
• Source: INT
• Date of Receipt: today's date
• Notes: 'Commission/Contract income received xx/xx/xxxx from <insert source of income> for period <insert period>. Cease income on OINS from <insert end date plus 1 day here>.'
• Keywords: OINSLUMP
• Workgroup: leave blank
• Position: leave blank
• Transfer to Region: leave blank

The review will mature on the Due Date coded in the RVR activity. Workload Management will allocate the review for manual action.

Record a Note or DOC.

If the customer or partner receives Family Tax Benefit (FTB) run the Family Income and Choices workflow to record the customer's new estimate, if required, after completing the income update.

For Child Care Subsidy (CCS) customers, see Changes in circumstances and date of effect for Child Care Subsidy (CCS) and Additional Child Care Subsidy (ACCS).