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Re: Centrelink back pay

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Hi,

My husband has recently been granted the pension. However a back payment was issued in August this year but it covers the period starting from February 2017. I would have thought that centrelink would issue a payment summary for the period from February to 30th June. Or does it go onto next years tax return because it was actually paid after 30th June. Thanks in advance for any help.

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Hi Geebee,

 

You are correct in it being reported in the current financial year (2018). You can always double check with Centrelink.If you would like further reading on this I will insert a link and relevant paragraphs for guidance. The age pension would be treated as a replacement of income. 

 

Paragraphs:

 

Definitions

Receipts method

8. The 'receipts' method is sometimes called the 'cash received' basis or the 'cash' basis. Under the receipts method, income is derived when it is received, either actually or constructively, under subsection 6-5(4) of the ITAA 1997. The effect of that subsection is that income is taken to have been derived by a person although it is not actually paid over, but is dealt with on his/her behalf or as he/she directs.

 

18. The receipts method is likely to be appropriate to determine:

*income derived by an employee; *non-business income derived from the provision of knowledge or the exercise of skill possessed by the taxpayer; and *business income where the income is derived from the provision of knowledge or the exercise of skill possessed by the taxpayer in the provision of services, subject to the qualifications listed at paragraph 45.

 

Please note this is my personal view; I’m an ATO employee who chooses to help out here in my own time

 

 

 

 

 

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Hi Geebee57,

 

What type of pension is it? It may not be assessable for tax.

 

Please note this is my personal view; I’m an ATO employee who chooses to help out here in my own time

Initiate

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Hi MikeD,

Its the age pension

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ATO Certified

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Hi Geebee,

 

You are correct in it being reported in the current financial year (2018). You can always double check with Centrelink.If you would like further reading on this I will insert a link and relevant paragraphs for guidance. The age pension would be treated as a replacement of income. 

 

Paragraphs:

 

Definitions

Receipts method

8. The 'receipts' method is sometimes called the 'cash received' basis or the 'cash' basis. Under the receipts method, income is derived when it is received, either actually or constructively, under subsection 6-5(4) of the ITAA 1997. The effect of that subsection is that income is taken to have been derived by a person although it is not actually paid over, but is dealt with on his/her behalf or as he/she directs.

 

18. The receipts method is likely to be appropriate to determine:

*income derived by an employee; *non-business income derived from the provision of knowledge or the exercise of skill possessed by the taxpayer; and *business income where the income is derived from the provision of knowledge or the exercise of skill possessed by the taxpayer in the provision of services, subject to the qualifications listed at paragraph 45.

 

Please note this is my personal view; I’m an ATO employee who chooses to help out here in my own time

 

 

 

 

 

Initiate

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Hi MikeD,

Youve expertly answered my question! Thanks alot for the information. Much appreciated. 

Cheers,

I'm new

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That's interesting.
Previously I received UK age pension in a lump sum backdated for several years; my tax agent arranged for this pension to be assessed in the years it related to rather than all in the year received.
Now I'm in the same situation as the OP - received Australian Age Pension in July backdated to February. Can I get last year's amount retrospectively added to last year's income, or will I have to include the whole amount in this year's income even though some relates to last year ?
Thanks,

Devotee

Replies 1

Hi @bluebottle,

 

Thanks for getting in touch! We've answered this question as though you were eligible for the pension in February 2018, but didn't receive the payment until July 2018 (so in the next financial year). Let us know if we've gotten this the wrong way around and we'll correct our answer for you!

 

Generally speaking, you need to report income in the financial year you receive it. If you receive a lump sum payment, you may be entitled to a special tax offset to reduce the amount of tax you need to pay. This is particularly useful where the lump sum payment should have been distributed over multiple tax years, as ordinarily the tax would have been paid over time.

If you receive a taxable lump sum payment from Centrelink (and you need to lodge a tax return), you'll need to report this amount in a particular place in your return, depending on how you lodge. If you lodge by paper, you'll need to declare your lump sum payment at Income item 24 in the supplementary section; if you prefer to lodge online, contact us to discuss your situation in more detail.

 

Hope that helps!

Newbie

Replies 0

Hi

I have a similar issue. I became eligible for the age pension in January 2018, and applied in December 2017.

However, it took so long for my application to be processed, I didn't receive any payments until July 2018 when I received back pay from January 2017.

Had I received the back pay prior to July 1, 2018 I would not have been liable for any tax.

But if i have to declare the back pay in the 2018-2019 financial year, i will be liable for tax as it will be as though i was getting a double pension for six months or so.

Does the tax office recognise that I should have received the money in the 2017-2018 financial year, or will it insist I pay tax on it?

Thank you for your help

Tansy

Community Support

Replies 1

Hi @Tansy,

 

Welcome to our Community!

 

If you've received a Government payment such as the age pension, you'll need to declare this in an income tax return. Depending on your situation, you may not have to pay tax on these payments (as they may be exempt from tax), however they need to be reported on your return as the information is used to calculate other government benefits and tax offsets.

 

Centrelink should provide you with a summary of payment information which you've received during the financial year.

 

If you have further questions about reporting these payments in a return, you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks, JodieH.

Newbie

Replies 0

Hi Jodie

 

Thank you for your reply. Yes, I will certainly declare it; I was just worried as my accountant seemed to think that it would all be assessed in the current financial year and I would have to pay tax on the whole amount added to this financial year's pension even though most of it was for the previous financial year in which, even with the pension, I wouldn't have had a taxable income.

 

I see from one of the other answers, however, that the lump sum backpay doesn't go in the ordinary income column but under a different section where it is assessed according to when it was due, rather than when I received it, if that is the case, I should not be liable for tax. Fingers crossed I have understood it right.

 

Kind regards

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