Income Maintenance Period (IMP) 106-05020020

The IMP encourages customers to provide for themselves after they stop employment. It eliminates inconsistencies in the treatment of leave and redundancy payments. An IMP may be imposed on a customer who is paid unused leave or redundancy entitlements after stopping or terminating employment.

Leave payments made for a current employee/employer relationship where the person is employed on a continuing basis (such as temporary periods of leave) are treated as employment income, not a termination payment. See Leave and termination payments paid by an employer.

Payments affected by an IMP are:

• Austudy
• Disability Support Pension (DSP)
• JobSeeker Payment (JSP)
• Parenting Payment (PP)
• Youth Allowance (YA)
• Farm Household Allowance (FHA)

All unused leave and redundancy payments paid to the customer or their partner when their employment has been terminated in the last 12 months, should be included in IMP calculations. This may include multiple employers.

Customers affected by a waiting period for an income support payment, can test their eligibility for a Low Income Health Care Card (LIC).

Note: regardless of whether the customer and/or partner are claiming or receiving an IMP affected payment, staff must discuss with the customer whether an update of assets is required to reflect the change in circumstances. For example, update bank balances or purchase of new assets.

Redundancy payments are included in the calculation of the IMP, and these amounts are treated as ordinary income. Redundancy payments may include:

• payment in lieu of notice
• gratuities or golden handshakes
• compensation for loss of job
• payment because of the employee's invalidity (permanent disability), other than compensation for personal injury
• bona fide redundancy and approved retirement scheme payments in excess of the tax free amount
• certain payments after the death of an employee

Redundancy payments can be treated differently to other leave payments for the purposes of the IMP calculation. This will depend on how the employer calculated the redundancy payment.

Under the IMP, unused leave and redundancy payments are treated as income for a period equal to that for which the leave was paid. Unused leave and redundancy payments (paid for a period of time), for example, 2 weeks' pay for each year of service, are rounded down to the nearest day.

Non-time dependent redundancy payments, for example a $20,000 golden handshake, are divided by the employee's average gross weekly wage and the calculated amount of weeks is rounded down to the nearest week.

Example 1

A customer has been made redundant from a company and on the day of leaving, their payment consisted of:

• 5 weeks annual leave
• 10.5 weeks long service leave
• $25,500 gratuity payment (also known as a 'golden handshake'), and
• 4 weeks payment in lieu of notice

IMP calculated as follows:

• 5 weeks annual leave = 5weeks IMP
• 10.5 weeks long service leave = 10.5 weeks IMP
• $25,500 / $1,000 (gross weekly income) = 25.5 weeks rounded down to 25 weeks IMP, and
• 4 weeks payment in lieu of notice = 4weeks IMP

Any part of the redundancy paid for a period of time, for example, the person received 2 weeks' pay for each year of service, is treated as income for a period equal to that for which it was paid.

The IMP does not apply to any transitional Employment Termination Payments (ETPs) that were:

• made between 1 July 2007 and 30 June 2012 (where the customer was entitled to these transitional arrangements under a written contract or under the Workplace Relations Act 1996 as at 1 May 2006) and
• were rolled over into deferred annuities, superannuation bonds, superannuation schemes, allocated pensions or approved deposit funds

All other ETPs are subject to the IMP and cannot be rolled over into superannuation.

An ETP is generally a lump sum payment paid when a person is:

• made redundant
• resigns
• retires or dies

An ETP is limited to invalidity payments, Time-In-Lieu of Notice, Rostered Days Off, Sick Leave and the portion of the redundancy payment that is not tax-free. The References page provides a link to Policy for further description of ETPs for IMP purposes.

Payments made in respect of unused leave entitlements upon cessation of employment (for example, long service, recreation, sick leave and rostered days off) are treated as ordinary income and the IMP applies from the date the FEG payment is paid to the customer.

Under the IMP where employment has ceased, any termination payments paid to a person or partner are treated as ordinary income and apportioned across the period covered by the IMP.

Customers paid leave payments before claiming payments from Services Australia are more likely to have no entitlements during an IMP, than those who receive leave payments whilst on receipt of payment.

Customers are required to declare all other income they are paid while subject to an IMP, however the income may not affect their payment if their rate is already zero. The IMP may form part of an employment income nil rate period if the leave payments along with income from other employers reduces the customer's payment to zero. All customer income must be declared as it may also affect the rate of payment for a partner receiving an income support payment.

A Service Officer may decide that an IMP does not apply, in whole or in part, if Services Australia is satisfied that:

• the IMP would cause severe financial hardship, and
• the hardship was caused by unavoidable or reasonable expenditure. The expenditure cannot exceed the amount of benefit that would be paid if no waiting period was applied

See Assessment of hardship for Income Maintenance Period (IMP)

Exception - If the delegate is satisfied based on the evidence given, that the person is in severe financial hardship due to the portion of the person's expenditure that was unavoidable or reasonable, the delegate may waive the remainder of the person's IMP. For example, the verified gambling expenditure of a person with a diagnosed gambling addiction could be considered unavoidable expenditure in some cases.

Recently widowed customers claiming/granted JSP or YA who are within a bereavement period , will have a Bereavement Waiting Period exemption and will be auto exempt from serving the entire IMP where:

• the claim is submitted within 14 weeks of their partner's date of death, or
• if pregnant at the time of their loss, the claim is submitted before the birth of the child or end of the pregnancy

If an auto exemption is applied for this reason, an Exemption Indicator of 'B' displays against the IMP on the NDC screen.

The following information explains the effect of IMP on couples.

If one or both members of a couple are paid a lump sum leave payment on termination of employment or a redundancy payment and one of the couple receives an IMP affected payment the lump sum payment should be assessed under the IMP provisions. The IMP is not included when working out the rate of:

• Age Pension
• Carer Payment or Service Pension
• Income Support Supplement (ISS), or
• Veteran Payment

This is regardless of which partner was paid the unused leave and/or termination payment. It should be recorded to correctly determine any IMP for the partner.

If a customer is affected by an IMP for an income support payment, they can test their eligibility for a Low Income Health Care Card (LIC).

If a customer is on nil payment due to an IMP and is going overseas, the Portability Script - Departures and Returns should be run. When using the script, consider the following points:

• it may be necessary to tell the script to include the payment in the assessment (just follow the script's prompts)
• the script will assume the payment is current and payable, and any letters / documents / messages will be worded accordingly
• the script should perform the coding. This should be checked thoroughly before approving the changes to make sure that it has been actioned correctly

If a customer or their partner is paid out unused leave upon stopping employment overseas, the IMP is still applied. The customer should provide details of leave payments paid. Assess each case to determine the capacity of the customer to get the information.

Accept the information given by the customer if:

• the customer has tried and is unable to get the information from the former employer and
• it is not possible to get this through other means

Take a statement from the customer outlining details of leave payments paid and reasons for not providing proof from the employer.

Some industries, in particular the mining and building/construction industry, have introduced long service leave portability funds in which a person's long service leave entitlements and superannuation funds can accrue when they move between companies whose work continuity is volatile.

These funds are assessed under IMP provisions. They usually do not represent a period of leave in days, so the IMP is calculated based on the person's gross average weekly wage.

IMP calculation:

Lump sum payment $10,000 divided by $1,500 (gross weekly wage) = 6.66 IMP weeks/6 weeks rounded down/30 IMP days.