Lump sums while on income support

A lump sum is a one off amount of money. They can count in your income test and may affect your payment from us.

When to tell us if you get a lump sum

If you report fortnightly and get a lump sum, you need to tell us in the reporting period that you get it.

If you don’t report fortnightly and get a lump sum, you need to tell us within 14 days of the earlier of these 2 dates:

  • the date you’re able to get the lump sum
  • the date you actually get it.

You must tell us about any lump sum you get, even if you think it’s exempt from the income test. You also need to tell us about any changes to your assets.

If you don’t tell us, we may overpay you. If this happens you’ll have to pay us back.

What counts in the income test

There are 2 types of lump sums:

  • remunerative
  • non-remunerative.

We treat them differently in the income test.

Remunerative lump sums

These are in return for something you’ve done. They include any of these:

  • a commission payment
  • a bonus
  • back pay from employment
  • director’s fees
  • leave payouts from your employer while you’re still employed
  • a signing on fee, sponsorship or endorsement payment to a professional sports person
  • a loan you don’t need to pay back because you’ve received it as a payment for your services.

How we treat remunerative lump sums in the income test

If the lump sum is a regular amount, we assess it for the same timeframe. For example, a monthly commission counts in your income test for a month.

If it’s not a regular amount, we look at how long it took you to earn it. For example, if it’s commission at the end of a 6 week job, we assess the amount over 6 weeks for the income test.

If you didn’t earn the amount over a set period, we assess the amount over a period of up to 52 weeks.

If the lump sum is back pay from employment, we assess it as income for a period equal to the period that back pay covers. For example, if you receive back pay for a total of 104 weeks, we’ll assess the amount over 104 weeks for the income test.

The assessment period starts on the first day of the Centrelink pay period you’re paid the lump sum amount in.

Non-remunerative lump sums

These include any of the following:

  • a royalty payment
  • a grant or scholarship
  • a dividend from a private company
  • a distribution from a private trust.

We spread these amounts over 52 weeks, starting on the day you get it or are able to get it.

If your lump sum is a taxable payment, it may affect your family assistance payments. This is because those payments depend on your adjusted taxable income.

What doesn’t count in the income test

Lump sums may be exempt from the income test if they meet all of these:

  • unlikely to happen again
  • hard to predict
  • not for a service or work provided.

They include any of these:

  • a one off gift, prize, reward, lottery win, or amount of superannuation
  • an inheritance
  • a payout from a property settlement, or for damages to property or personal effects
  • flood, bushfire and drought assistance
  • some redress payments, such as for negligence
  • compensation from an Australian trust.

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How lump sums could indirectly affect your payment

What you do with lump sums may affect you under the income or assets test. It doesn’t matter if the lump sum is exempt.

Buying or paying off assets

If you spend the money on an exempt asset it won’t affect you under the assets test. This includes your principal home, mortgage, or medical equipment.

If you buy a non-financial asset it will count in the assets test. This includes things like art work or a holiday home.

Buying or adding to financial assets

We use deeming rules to work out income from your financial assets. This applies if you use the lump sum you get to buy or add to financial assets. The deemed income counts in the income test. The assets may also count in the assets test.

Deeming rules will apply to lump sums if you’re:

  • putting the money in the bank
  • lending it
  • using it to buy securities or investments
  • putting it in your super fund if you’re over Age Pension age.

Putting a lump sum into your super fund won’t affect your income or assets test if both of these apply:

  • you’re under Age Pension age
  • you haven’t started drawing on the fund.

Gifting lump sums

You can give away all or part of your lump sum. But anything over the gifting free areas counts in the assets test. It will also be assessed under the income test through deeming. The gifting free areas are:

  • $10,000 in a financial year
  • $30,000 in 5 financial years - this can’t include more than $10,000 in any financial year.

For example, if you gift $10,000 in one financial year, you have reached the gifting free area for that year. If you gift $10,000 each financial year for 3 years within 5 financial years, you have reached the gifting free area.

If you put the money into a trust, we may treat it as a gift. It depends on who has control of the trust.

Page last updated: 28 September 2023.
QC 28961