Raising social security debts due to self-employment or business income 043-03130130

Cathy is granted Disability Support Pension (DSP). Cathy's partner Chris, advises (on 10 November 2005) of being self-employed. They provide a copy of the 2003-04 tax return.

Chris' income of $12,000 per annum (pa) for 2003-04. This amount is coded. They have no other income. On 15 November 2005, they are sent letters stating they need to advise Services Australia (the agency) within 14 days if their combined income increases.

• On 16 December 2005, Chris signs the 2004-05 tax return indicating income from self-employment of $15,000. Chris does not advise the agency within 14 days
• On 14 May 2007, Chris signs the 2005-06 tax return indicating that the income increased to $18,000. Again, Chris does not advise the agency
• On 18 November 2007, Chris signs the 2006-07 tax return showing a reduction of income to $10,000 p.a. Again, Chris does not advise the agency
• On 20 November 2008, Chris signs the 2007-08 tax return showing an increase in income to $13,000. Chris also indicates to the Australian Taxation Office of ceasing self-employment on 30 June 2008. Chris does not tell the agency

Following Data Matching, it is confirmed that Chris had the following amounts of income from self-employment and the Decision Maker (DM) obtains the dates the tax returns were signed.

Financial year, income and dates of signed income tax returns (ITRs)

This table shows the financial years, the income amounts and dates that signed tax returns where supplied for this scenario. The DM is raising the debt on the 20 September 2009.

Financial year	Income amount	Date Tax Return signed
2003-04	$12,000	12 December 2004
2004-05	$15,000	16 December 2005
2005-06	$18,000	14 May 2007
2006-07	$10,000	18 November 2007
2007-08	$13,000	20 November 2008

Question: What is the start date of the debt?

Answer

The first notifiable event is 16 December 2005 and the debt starts on 16 December 2005 per section 100 of the SSAA.

Question: What income figure should be used from the start date?

Answer

On 16 December 2005, the customer’s ITR was prepared for the 2004-05 financial year. Use the 2004-05 financial year income.

Question: What dates and income figures should be used after that?

Answer

When the customer has not notified at all, the debt continues on from 16 December 2005 until 30 June 2008. This is the date self-employment ceased. Use income from the customer’s ITR or financial statement to update the record and identify any overpayments.

This means use:

• 2004-05 financial year income to assess entitlement from 16 December 2005 to 13 May 2007
• 2005-06 financial year income to assess entitlement from 14 May 2007 to 17 November 2007
• 2006-07 financial year income to assess entitlement from 18 November 2007 to 30 June 2008

Question: What is the end date of the debt?

Answer

As above the end date of the debt is 30 June 2008, the date the customer ceased self-employment. Section 126(4) of the SSAA is used to stop the debt in these circumstances.

Example

If Chris had not ceased self-employment, the last reported income i.e. 2006-07 would continue to apply to the end date of the debt. The Process page contains step by step information.

Customer 1

• Brian:
• claims Age Pension on 10 November 2005 but does not advise of being self-employed
• has the same income details as Chris above
• signed his 2003-04 tax return on 12 December 2004

Customer 2

• Angela:
• has been on Carer Payment since 2001
• became self-employed on 10 November 2005 but does not advise the agency
• also has the same income details as Chris, however as Angela did not commence self-employment until 10 November 2005, the first tax return completed was for the 2005-06 financial year

The Service Officer is raising the debts for both Brian and Angela on 20 September 2009.

Question: What is the start date of the debt?

Answer

In both cases, use a manual, adverse determination under section 118(9) of the SSAA. This is because both Brian and Angela have made a false statement/misrepresentation. The start date of the debt for:

• Brian is 10 November 2005 (that is, date of grant)
• Angela is 10 November 2005 (that is, the date self-employment commenced)

Question: What income figure should be used from the start?

Answer

Brian, use actual income - 2003-04 financial year income from 10 November 2005.

Angela, use actual income - 2005-06 financial year income from 10 November 2005.

Question: What dates and income figures should be used after that?

Answer

Use income from the customer’s ITR or financial statement to update the record.

This means in:

• Brian's case use:
• 2004-05 financial year income to assess entitlement from 16 December 2005 to 13 May 2007
• 2005-06 financial year income to assess entitlement from 14 May 2007 to 17 November 2007
• 2006-07 financial year income to assess entitlement from 18 November 2007 to 30 June 2008
• Angela's case use:
• 2005-06 financial year income to assess entitlement from 14 May 2007 to 17 November 2007
• 2006-07 financial year income to assess entitlement from 18 November 2007 to 30 June 2008

Note: for Angela, maintain the 2005-06 financial year income until the actual business income for 2006-07 financial year is known. In this example the 2006-07 financial year income is known on 18 November 2007.

Question: What is the end date of the debt?

Answer

The end date of the debt is 30 June 2008, the date the customer/s ceased self-employment. Use s126(4) of the SSAA to stop the debt in these circumstances.

Note: if Brian and Angela had not ceased self-employment, the last reported income i.e. 2006-07 continues to apply until the end date of the debt. The Process page contains step by step information.

Georgia is granted Age Pension. Georgia advises being self-employed and provides a copy of the 2005-06 tax return. Georgia's income is $4,000 per annum for 2005-06 financial year. Code this amount.

Following Data Matching, it is confirmed that Georgia had the following amounts of income from self-employment. Get the dates the tax returns were signed.

Financial year, income, dates of signed ITRs and whether advice was received

This table shows the financial years, income amounts and dates tax returns were signed for this scenario and whether Services Australia was advised. Raise the debt on 25 September 2013.

Financial year	Income amount	Date Tax Return signed	Advised the agency
2005-06	$4,000	20 December 2006	Yes
2006-07	$13,000	4 January 2008	No
2007-08	$17,000	20 December 2008	No
2008-09	$12,000	1 June 2010	No
2009-10	$15,000	1 September 2010	Yes
2010-11	$25,000	5 February 2012	No
2011-12	$14,000	30 September 2012	Yes
2012-13	$45,000	5 August 2013	No

Question: What is the start date of the debt?

Answer

The first notifiable event is 4 January 2008, and the debt starts on 4 January 2008 per section 100 of the Social Security Administration Act (SSAA) 1991.

Question: What income figure should be used from the start date?

Answer

Assess the income from the date the tax return was signed. It will be the 2006-07 income of $13,000.

Question: What dates and income figures should be used after that?

Answer

This means use:

• 2007-08 financial year income for the period 20 December 2008 to 31 May 2010
• 2008-09 financial year income for the period 1 June 2010 to 31 August 2010
• 2009-10 financial year income for the period 1 September 2010 to 4 February 2012
• 2010-11 financial year income is used for the period 5 February 2012 to 29 September 2012
• 2011-12 financial year income for the period 30 September 2012 to 4 August 2013
• 2012-13 financial year income for the period from 5 August 2013 through to the end date of the undetermined debt. This income is maintained until the 2013-14 income tax return and financial statements are prepared

Jack has been on Age Pension since 2015, he commenced self-employment on 1 January 2020, but did not advise the agency.

• On 1 May 2020, Jack lodged his Profit and Loss statement. He reported $10,000 from self-employment for the 2019-20 financial year
• On 1 August 2020, Jack lodged a tax return with the agency, his self-employment income was $63,000 for the 2019-20 financial year. Business documents show Jack signed a new $50,000 contract on 15 April 2020

Question: Can the debt be raised using the Profit and Loss statement before a tax return is lodged?

Answer

Yes, in this example, the debt period is 1 January 2020 to 30 April 2020.

Question: When should reassessments be completed?

Answer

Delegates must determine whether the increase in the reported amount was significant enough for the customer to have known before the date they reported the increase.

• Was the increase gradual and not something the customer may have been aware of before lodging their tax return?
• Did the customer become aware of the increase on a particular date?

In the example, Jack became aware of the increase in income on 15 April 2020. This is the date he signed the contract. Jack should have reported the significant increase in income within 14 days of the event.

• the agency will reassess his rate of payment from 15 April 2020
• the debt period is 15 April 2020 to 30 July 2020