From ITSA's March 2009 "Personal Insolvency Regulator"
During February this year the Rudd Government announced a $42 billion stimulus package known as the “Nation Building and Jobs Plan”. The Plan includes a number of ‘bonus’ payments and ITSA has received enquiries as to how these payments will be treated in bankruptcy.
There are 5 different bonus payments:
- a Tax Bonus of up to $900 for taxpayers earning less than $100,000 per annum;
- a Single Income Family Bonus of $900 for families who currently receive the Family Tax Benefit Part B;
- a Farmers’ Hardship Bonus of $950 for drought affected farmers who are currently receiving other kinds of support (such as exceptional circumstances relief payments);
- a Back to School Bonus of $950 per child for families who currently receive the Family Tax Benefit Part A; and
- a Training and Learning Bonus of $950 for persons currently receiving certain other benefits (such as Austudy and ABSTUDY).
The bonus payments will be paid in March and April 2009 and are not taxable. Nor are they income for income support purposes (with a minor exception noted below).
The information available about the bonus payments and the nature of the Plan as a whole suggest that the payments are in the nature of income supplements, rather than capital (even though they will be paid as a lump sum). In view of this and the fact that they will not be counted as income for social security purposes, ITSA’s view is that:
- bonus payments under the Plan received after bankruptcy are neither income of the bankrupt nor an asset that vests in the trustee;
- there is one qualification to this – some recipients of the Training and Learning Bonus will have the $950 bonus payment added to an existing entitlement to a payment of $208 known as the Education Entry Payment (EEP). This EEP is a taxable payment and is counted as income for social security purposes. Therefore, where a combined payment of $1158 is received, the $208 EEP component of that payment should be considered income for bankruptcy purposes.
- any portion of a bonus payment received prior to bankruptcy that remains at the date of bankruptcy would be an asset that vests in the trustee.
This treatment is consistent with that adopted for the payments made under the Government’s Economic Security Strategy stimulus package late last year.
Senior Legal Officer
Legal and Executive Support