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4.3.6.10 Income from Overseas Payments - General Rules

Summary

This topic provides information about the following:

  • overseas pensions,
  • overseas pensions - blocked,
  • treatment of CFP payable to surviving spouses in the bereavement payment period,
  • arrears of overseas pensions,
  • eligibility conditions and income test treatment details - agreement countries, and
  • other overseas pensions.

 

Overseas pensions - general

The gross current rate of overseas pensions is generally treated as income for social security purposes whether the payments are made:

  • from overseas, or
  • through an Australian agent.

 

No amount is deducted for any bank charges or for foreign country debts deducted from the overseas pension payments.

 

Exception: Overseas pensions may be treated as a direct deduction rather than as ordinary income when the recipient is in Australia and would not be eligible for an Australian payment without the help of an agreement.

Example: Under the 2002 New Zealand Agreement, the amount of New Zealand superannuation and New Zealand invalid benefit payable is always directly deducted from the rate of an Australian social security payment otherwise payable.

 

Exception: Some of Australia's international social security agreements have provisions to disregard some components of overseas pensions from the income test.

Example: The Italian supplement is generally exempt as income for all payments except SpB.

 

Exception: Some overseas pensions are not assessed as income as they are exempt under social security law.

Example: Pensions paid as compensation for National Socialist persecution are exempt from the social security income test.

 

Act reference: SSAct section 8(8)(n) an amount paid,...

Policy reference: SS Guide 4.3.6.11 Income from Overseas Payments - Specific Payments, 4.3.6.30 Holocaust Restitution Payments - Germany & Austria, 4.3.6.31 Holocaust Restitution Payments - Other Countries, 10.1 General Principles of Agreements, 10.2 Agreement with New Zealand 2002, 10.1.9.80 Payments Exempt Under Agreements

 

Overseas pensions - blocked

The treatment of blocked foreign income is dealt with by the Federal Court in Rose v Secretary, Department of Social Security (1990) 21 FCR 241. The Rose decision held that no territorial limitation could be implied into the definition of income. 'The construction and application of the definition of income does not depend on the circumstances that an applicant for a pension may choose to live in Australia or another country or both countries.'

 

Therefore, because access to a foreign pension is severely limited, for example, the paying country restricts payment of pensions overseas, or access is restricted to residents of or to people physically present in the paying country, does NOT mean the pension is considered 'blocked'.

 

Depending on the circumstances of the individual case, however, it MAY be accepted that a pension is NOT income for social security purposes, where the prospect of receiving the money is so remote that the monies are not 'earned, derived or received' for the person's own use or benefit.

Explanation: Shepard J in Inguanti v Department of Social Security ((1988) 15 ALD 348) stated that where the prospect of ever receiving money is remote, or if receipt of money, although certain, is likely to be so far in the future as to make the money of no relevant benefit in the present, it may be correct to say the money is not 'derived'.

 

Example 1: Country A

Due to political or financial crisis Country A is withholding remittance of pensions to 'residents' and 'non-residents'. Information is not available as to when this restriction is likely to be lifted. The available evidence however suggests that the prospect of the recipient ever receiving the money is so remote, or so far into the future, as to make the money of no relevant benefit at the time the matter is considered.

 

Example 2: Country B

Country B has suspended remittance of pensions to 'non-residents'. Information from Country B suggests that it has no intention of removing this restriction. Also, an official travel warning has been issued by DFAT, advising against all travel to that country now and for the foreseeable future.

 

Example 3: Recipient cannot travel to another country to access their overseas pensions.

A recipient can only access their overseas pension by being physically present in the other country. However, they cannot travel overseas due to a medical condition, and there is no reasonable prospect of them being able to travel overseas to access their pension in the foreseeable future.

 

In cases such as this the recipient must be reminded that they have a legal obligation to notify Centrelink as soon as their pension payments are restored. Delegates should also attempt to verify information provided by recipients. Evidence may take the form of a letter from an independent source (e.g. fund manager or embassy). Delegates are also asked to contact CIS or DSS International Branch BEFORE they make a decision that income is blocked.

 

Treatment of CFP payable to surviving spouses in the bereavement payment period

On the death of a partner some recipients may also be granted either a survivor's (or widow's) pension, which is a type of CFP payable to surviving spouses, or an increase in their own payment. Where this occurs the survivor's pension income, or additional surviving spouse payment, is NOT assessed in the 14-week bereavement payment period.

 

Arrears of overseas pensions

All lump sum payments representing arrears of overseas pension entitlement (CFPs) are treated as periodical payments for the period covered by the arrears payment. The gross amount of lump sum payments representing arrears of overseas pension entitlements (CFPs) is assessed as income for social security purposes. The gross amount includes payments such as voluntary insurance contributions, made from the arrears payment. Any amount by which the social security payment (for the recipient or their partner) would have been reduced is a recoverable debt. The lump sum is NOT counted in the fortnight of receipt for either pension or allowance purposes.

Example: On 30 July 2004 an age pensioner receives a lump sum CFP amount in arrears. The amount is for the period 30 March 2003 to 20 July 2004. The lump sum is apportioned over the period 30 March 2003 to 20 July 2004 and any amount by which any social security payment to the pensioner or their partner would have been reduced becomes a recoverable debt. The lump sum is NOT counted as income at the time of receipt.

 

Act reference: SSAct section 1228A Comparable foreign payment debt recovery, section 8(11) An amount received by a person is an exempt lump sum

Policy reference: SS Guide 4.3.1.20 Determining the Rate of Income for Pensioners of Age Pension Age from 20/09/2009, 4.3.2.35 Income Exempt from Assessment - s8(11) Exempt Lump Sums, 6.3.1 Non-payment-specific Overpayments, 7.3.1.30 Applying CFP Provisions

 

Arrears paid under an international agreement

Some overseas pension arrears, representing amounts payable before the decision to grant the foreign pension, can cause a recoverable debt under an international agreement. This debt is normally recovered from arrears direct from the overseas country and no debt is raised for the recipient. The person's partner, however, may still have a recoverable debt raised under SSAct section 1228A.

 

Policy reference: SS Guide 10.1.8 Arrears, Embargoes & Overpayments

 

Eligibility conditions & income test treatment details - agreement countries

Eligibility conditions and details of treatment under the income test (whether Australian pension is paid under the agreement or autonomously) for specific pensions from the agreement countries is provided in SS Guide 10.1.4 and 10.1.9.

 

Other overseas pensions

Other overseas pensions NOT covered by the agreements with the agreement countries are also paid to people in Australia and to Australian pensioners overseas. The gross amount of all overseas pensions, whether government or privately funded, is assessed as ordinary income (1.1.O.30) and need to be reviewed annually to update their rates.

Examples: The most common are war pensions and public service pensions.

 

Policy reference: SS Guide 4.3.9.70 Income from Private Annuities & Overseas Income Streams

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Last reviewed: 12 November 2012


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