Treatment of lump sums 108-05020020

There are 2 types of lump sums:

• A form of wage or amount paid for a service provided. They are:
• remunerative lump sums
• generally assessable if paid after claiming an income support payment
• A ‘profit’ that is not an exempt lump sum. They are:
• non-remunerative lump sums
• Treated as income for 52 weeks (364 days)

Remunerative Lump Sums

For remunerative lump sums, the assessment start date is the entitlement period start date (EPSD) of the period in which the lump sum is paid. The assessment period will be for a number of days equal to the period that the payment represents. Any period where an income support payment is not paid is included in this period.

This applies to all remunerative lump sum amounts paid to the person or their partner after claiming.

For help in determining the correct date of event, see Determining the Date of Event for employment income.

Non-remunerative lump sums

For non-remunerative lump sums, the assessment start date will be the earlier of the date the lump sum is paid or is able to be received. Assessment will be for a period of 52 weeks (364 days) from this date. Any period where an income support payment is not paid is included in this period.

• For ABSTUDY payments, non-remunerative lump sums are only taken into consideration when they are paid on or after the date of claim. See Leave and Termination payments paid by an employer for details of specific coding.
• All other income support payments, are assessed for a period of 52 weeks (364 days) even if they were paid before claiming a payment

Some assessable foreign lump sums are treated differently:

• arrears of a comparable foreign payment are assessed for the period to which the arrears relates, and
• arrears of foreign income streams are assessed as if the payment was paid throughout the arrears period

Some examples of lump sums include:

• arrears of a comparable foreign payment
• arrears of foreign income streams
• other foreign lump sums, such as, payments in lieu of pensions and other commutations or refunds of contributions or other withdrawals
• arrears of defined benefit income stream payments from a superannuation fund before starting regular ongoing payments. See Adding or updating a defined benefit or military invalidity pension income stream
• arrears of periodic payments paid from personal injury insurance schemes and disability benefits
• lump sum withdrawal from a superannuation fund or lump sum arrears from a defined benefit superannuation fund
• leave paid out, but not taken. That is, the money paid when accrued leave entitlements are paid but instead of taking time off, the employee remains at work and receives wages at the same time. The procedure, Leave and termination payments paid by an employer, provides further details
• royalties
• payments to sports people (such as sign on fees, sponsorship)
• compensation lump sums (refer all compensation related enquiries to the Compensation Recovery Team in the relevant state)
• income from a profit sharing arrangement
• commissions from employment
• 2019/2020 Volunteer Fire Fighter payments
• payments from state governments about the taxi industry reform
• Aged Care Workforce Bonus payments
• Seasonal Harvest Sign-on Bonus payments
• Victorian Sick Pay Guarantee Payments
• One-Off Payments to Employees for NSW Health
• Victorian Healthcare Worker Winter Retention and Surge Payments
• Cost-of-living payment for WA public sector employees
• NSW Rural Health Workforce Incentive Scheme payments
• Tasmanian Government Frontline Health COVID-19 Allowance Payments
• Native Forest Workforce Transition Program 1 payments
• Queensland Government Cost of Living Allowance (COLA) Payment
• Aged Care Register Nurses' Payment
• ACT Government Employees Cost of Living (CoL) Payment
• Realignment Payment for APS Employees
• 0.92% APS Bargaining Payment 2024

Some of these lump sums are exempt from the income test. See Exempt lump sums.

From 7 December 2020, arrears of wages are:

• treated as income
• assessed from the Entitlement Period Start Date (EPSD) of the entitlement period in which the income was paid
• assessed for the same period of time for which the income was paid. This includes where there was both a 'present legal entitlement' and 'no present legal entitlement' for the period of back pay

For example, if a customer is paid a lump sum of back pay on 9 May 2022 for the period 1 July 2018 to 30 June 2020, the back pay is assessed as income for 731 days from the EPSD of the customer's entitlement period that includes 9 May 2022.

Note: From 7 December 2020, when back pay is paid for individual pay periods, there is no need to correct the periods to include the back pay.

Assessment of a lump sum of back pay received by a customer before 7 December 2020, depends on whether there was a 'present legal entitlement' at the time it was earned.

Arrears of pay are assessed retrospectively as income if the person had a 'present legal entitlement' at the time the arrears were earned. For example,

• they were paid less than the award wage
• they were underpaid due to administrative error

The employment income must be corrected for the past period to which the back pay applies and an overpayment raised.

If there was 'no present legal entitlement', for example when a workplace agreement backdates a pay increase, the back pay is a remunerative lump sum and the amount is held as income for 52 weeks (364 days) from the date the person becomes legally entitled to receive the payment.

Examples about back pay of wages (including before 07 December 2020) are available in the Resources page.

Death benefits paid from an employer in respect of accrued leave or paid by a super fund in respect of accumulated super to a beneficiary (for example, partner or dependent child) of a deceased person are not income for Centrelink purposes. Any increase in financial investments or other assets must be notified.

See:

• Taxable income for family assistance and Paid Parental Leave scheme payments, and
• Helping families provide a reasonable annual income estimate for family assistance payments

For lump sums incorrectly keyed on the Employment Income Paid Details (EAPP) screen:

• Manually update the information to zero ('0') on the EAPP screen or use the Earnings and Reporting workflow. See Recording and correcting employment income details
• Always use the same activity and date of event for both updates on EAPP and the Other Income (OIN) screen
• Update the correct information on OINS, see Recording other income on the Other Income (OIN) screen