Treatment of lump sums 108-05020020

Treatment of the lump sum payment depends on the type of lump sum paid.

Certain types of lump sums are exempt from income test assessment.

For a lump sum to be exempt it:

• must be unlikely to be repeated
• could not reasonably be expected to be paid or anticipated, and
• does not represent receipt of money for services rendered directly or indirectly

Some foreign lump sums are exempt lump sums:

• Examples are bereavement or funeral grants
• Refunds of contributions or other withdrawals or commutations are not assessable where the amount consists entirely of a return of the customer's contributions

Note: most overseas compulsory contribution schemes include contributions from the person's employer, making them assessable.

Exempt foreign lump sums are coded on the Foreign Income/Asset Detail (FID) screen.

For more details, see Exempt lump sums.

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 that come from:

• a comparable foreign payment (CFP), see Comparable foreign payment lump sum arrears debts
• a foreign income stream, see Foreign income and assets
• self-employment, see Assessment of income and assets from business structures for Centrelink payments

All other lump sums are either a:

• Remunerative lump sum:
• a form of wage or amount paid for a service provided
• generally, assessable if paid after claiming an income support payment. Go to Step 2 for examples of common remunerative lump sums and how they are assessed
• Non-remunerative lump sum:
• a 'profit' but is not remuneration and does not match the characteristics of the excluded lump sums. Go to Step 3

Select from the below.

Employment income, including bonus payments paid are treated as remunerative lump sums because it is in return for a service provided.

The income is assessed from the Entitlement Period Start Date (EPSD) of the period in which the payment was paid, for a number of days equal to the period that the payment represents. This is known as the assessment period.

If the customer or their partner receive back pay of employment income, make sure the following details are available:

• Date the back pay was paid
• Gross amount paid
• Period the back pay covers

Back pay is assessed from the Entitlement Period Start Date (EPSD) of the period in which it was paid for the same period of time for which the income was paid.

• If the back pay spans multiple pay periods, which are not consecutive, determine the total number of pay periods where back pay is relevant. For example, when an employer undertakes a bulk payroll review and back pay is paid for a period of 12 months. If only 2 fortnightly pay periods have back pay, the back pay period is 4 weeks, not 12 months
• If the back pay includes an interest amount, record it separately as a non-remunerative lump sum. Go to Step 3

Note: From 7 December 2020 when back pay is paid for individual pay periods, do not correct the pay periods. If the back pay was received before 7 December 2020, see Resources for an example of how to code.

Foreign remunerative lump sums are coded on the foreign Employment Income Paid Details (FEIP) screen.

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 the payment represents. This is known as the assessment period.

If the customer or partner are paid multiple income amounts in the same entitlement period from the same source, see Multiple pays received in a single entitlement period.

For foreign remunerative lump sums, go to Table 2, Step 5

For all other remunerative lump sums, go to Table 2, Step 1

Non-remunerative lump sums are assessed if the customer is claiming or receiving:

• ABSTUDY and the lump sum was paid on or after the date of claim
• another income support payment and the lump sum was paid:
• after the date of claim, or
• within 52 weeks (364 days) before the customer's or partner's date of claim

Non-remunerative lump sums:

• If the non-remunerative lump sum is from another country, go to Table 2, Step 6
• Distributions from private trusts and private companies are recorded by a Complex Assessment Officer (CAO) on the TAC system. The information 'ripples' through to the customer's or partner's record
• For lump sums paid from personal insurance schemes or disability benefits, see Income from personal injury insurance schemes and disability benefits
• All other lump sums, (except foreign pensions) must be recorded on the customer's or partner's Other Income (OIN) screen. See Recording other income on the Other Income OIN screen

Coding of remunerative lump sums will depend on the period of time the lump sum represents. The Perpetual Centrelink Calendar can be used to determine the duration of the lump sum.

For lump sums that represent a period:

• less than or equal to the persons entitlement period, go to Step 2
• greater than the persons entitlement period, go to Step 3

Note: for remunerative lump sums received before the 7 December 2020 employment income changes, go to Step 4

Key the employment income using the Earnings and Reporting workflow where possible.

Note: The Employment Income Summary (EANS) screen can assess multiple income amounts at one time. Each time a new amount is recorded on the Employment Income Paid Details (EAPP) screen, the amounts previously recorded for the same employer (if coded as IOP or LOP) will remain. These amounts will be assessed for the duration the payment(s) cover and assess the new amount coded.

• Record the remunerative lump sum using the Frequency code ‘Income for one period’ (IOP)
• The Event Date is the date the payment was received
• The income is assessed for each day in the entitlement period in which it is paid
• See Recording and correcting employment income details for help with coding the EAPP screen

Procedure ends here.

Key the employment income using the Earnings and Reporting workflow.

Note: the Employment Income Summary (EANS) screen can assess multiple income amounts at one time. Each time a new amount is recorded on the Employment Income Paid Details (EAPP) screen, the amounts previously recorded for the same employer (if coded as IOP or LOP) will remain. These amounts will be assessed for the duration the payment(s) cover, and assess the new amount coded.

• Record the remunerative lump sum using the Frequency code ‘Long period’ (LOP):
• The Start Date and End Date fields must include the dates of the period the back pay covers. 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 or above (through usual referral channels) to update this
• If the remunerative lump sum spans multiple pay periods which are not consecutive:
• code the End Date as the date the remunerative lump sum was paid
• count backwards from the End Date by the number of relevant pay periods to determine the Start Date. For example, if the End Date is 1 May 2022 and the remunerative lump sum period is 26 weeks, the Start Date is 1 November 2021. This enables the system to work out the correct number of days. This will then be assessed prospectively for the relevant period
• clearly record calculations and dates determined on the customer's record
• The Event Date is the date the payment was paid
• The system automatically stops the assessment of income once the applicable time ends
• See Recording and correcting employment income details for help with coding the EAPP screen

Procedure ends here.

Where a lump sum is received before 7 December 2020, it may be appropriate to record it using a continuous income frequency.

• Record details on the EAN screen
• Event date - The date the lump sum was received
• Convert the lump sum amount to a fortnightly (2WE) figure. This can be done by dividing the total amount by the number of days the assessment period represents and multiplying the daily amount by 14
• The continuous income must be ceased within the same activity in which it is recorded
• If the lump sum assessment is to continue past the customer’s entitlement period that includes 7 December 2020, the remainder of the lump sum to be assessed must also be converted to IOP/LOP
• See Resources of Recording and correcting employment income details for coding instructions to cease or convert the lump sum

Note: Resources contains an example of coding a lump sum received before 7 December 2020

Procedure ends here.

Foreign remunerative lump sums are coded on the foreign Employment Income Paid Details (FEIP) screen. In Process Direct, add details in the Foreign Income/Asset Details (FID) table on the FIPS screen using Type ‘EAN'.

• Record the lump sum using the frequency code ‘Long period’ (LOP)
• The Start Date and End Date fields must include the dates of the period which the lump sum covers. 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 or above (through usual referral channels) to update this
• The Event Date is the date that the lump sum payment was paid
• The system automatically stops the assessment of income once the applicable time ends

See Foreign income and assets for further help with assessing and coding foreign income.

Procedure ends here.

If the foreign lump sum is not exempt, and is not a remunerative lump sum it is:

• treated as a non-remunerative lump sum, and
• assessed for 52 weeks (364 days) from the date it was paid

Assessable non-remunerative foreign lump sums are keyed on the Foreign Income/Asset Detail (FID) screen:

• Record in the source currency
• Use the exchange rate applicable on the date the lump sum amount was paid
• Exchange rates are available on the Foreign Exchange Summary (RDFXS) screen
• If the date the lump sum was paid is unknown, use:
• the month of issue of the notice of grant (NOG), or
• the following month if the notice is issued within 5 days of the end of the month and it is in the customer's favour

Process Direct:

• Go to the Foreign Income (FIPS) screen
• On the Foreign Income/Asset Details (FID) table, select Add New Row
• On Create Foreign Financial, update:
• Country of Payment: Enter the source country for the payment
• Currency: Enter the source currency
• Type: 'LMP' - Non-remunerative Lump Sum
• Frequency: 'ANN' - Annually
• Reference/Description: Enter details of the payment paid
• Event Date/Start date: Date the lump sum was paid or able to be received
• Income - Non Pension: Enter the amount of the payment paid
• Select Save
• Complete the Receipt Date and Channel fields and select Save
• Select Assess and address any errors/warnings shown in the Message Log on the Errors (SWE) screen
• Go to the Entitlements (ELD) screen by selecting Assess again
• Once satisfied that the outcome shown is correct, select Finish
• Record details of the update in the Note on the Finalise screen

Customer First:

Go to the FID screen and code the following fields:

• Country of Payment: Enter the source country for the payment
• Type: 'LMP'
• Reference/Description: Enter details of the payment paid
• Event Date: Date the lump sum was paid or able to be received
• Currency: Enter the source currency
• Income Amt: Enter the amount of the income paid
• Frequency: 'ANN' - Annual

Record the details of the update on a DOC.

Procedure ends here.