Long service leave and Centrelink

Two situations, two different rules

Services Australia has different rules for long service leave if your job continues and if your job ended. The Social Security Guide says that leave payments are employment income if the employment continues. Unused long service leave paid when your job ends is a termination payment. This payment counts for the income maintenance period (SS Guide 4.3.4.10).

Which payments the income maintenance period affects

Services Australia lists these payments: JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, Disability Support Pension (except if you are permanently blind) and Farm Household Allowance.

The Social Security Guide says that the income maintenance period does not affect Age Pension, Carer Payment, ABSTUDY, Special Benefit and service pensions. For a couple, it applies only to the partner who gets an affected payment (SS Guide 4.3.4.10).

How Services Australia calculates the income maintenance period

The Social Security Guide has a list of leave payments for the income maintenance period. Long service leave is on this list, together with annual leave, sick leave, personal leave and leave loading (SS Guide 4.3.4.20).

The period is as long as the number of weeks or days that the leave payment covers. The calculation uses a 5 day working week. It uses gross amounts, not the net amount that you receive. Services Australia spreads the payment evenly across the period and assesses it as ordinary income (SS Guide 4.3.4.10).

The guide gives a worked example. The final pay of Michael included 10.5 weeks of long service leave. That counted as 10.5 weeks of his income maintenance period. With his other termination payments added, the total period was 44.5 weeks.

As a general rule, the period starts on the date when your employer pays you. If your employer makes a second termination payment, a second period starts after the first period ends (SS Guide 4.3.4.10).

You may still get a partial payment during the period. Services Australia says that this depends on the amount of the final payment from your former employer.

Liquid assets waiting period

JobSeeker Payment also has a liquid assets waiting period. It applies if you are a single person with no dependants and you have at least $5,500. It also applies if you have a partner or are single with dependants and you have at least $11,000. It lasts between 1 and 13 weeks.

Liquid assets are funds that you or your partner can easily get. Examples are cash, bank savings, shares, term deposits and wages that someone owes you.

If both waiting periods apply, you serve them at the same time. The income maintenance period starts on the day when the liquid assets waiting period starts (SS Guide 4.3.4.10).

Severe financial hardship

If you are in severe financial hardship, Services Australia can reduce or waive the income maintenance period. It can also waive the liquid assets waiting period. This is possible only if unavoidable or reasonable expenses caused the hardship. You must give proof, such as receipts. To ask, call your regular payment line.

How to report long service leave to Centrelink

Services Australia tells you to submit your claim, even if you did not get the money from your employer yet.

If you already get a payment and you take leave, report how much of your income in the reporting period was paid leave. Report the gross amount, which is the amount before tax and other deductions. Your employer can pay you a lump sum for leave. This includes leave that you accrued but did not take as time off. You must also tell Services Australia about this lump sum.

If you report each fortnight, report a lump sum in the reporting period when you receive it. If you do not report each fortnight, look at two dates. One is the date when you can first get the lump sum. The other is the date when you receive it. Tell Services Australia within 14 days of the earlier date.

When your job ends, your employer must report any unused leave or termination payments to Services Australia through Single Touch Payroll. If you ask for an Employment Separation Certificate, your employer must still give you one.

For the tax on long service leave, see our tax guide. For the payout itself, see our payout guide.

Paid Parental Leave

For the Parental Leave Pay work test, paid leave counts as work. Services Australia has operational guidance on this. It says that long service leave is not a non-permissible break, because it is paid leave and counts towards the work test.

Leave entitlements that an employer pays out, such as a lump sum of long service leave, do not count as work for the work test.

A Parental Leave Pay instalment under the Paid Parental Leave Act is not a leave payment for the income maintenance period (SS Guide 4.3.4.20).

Check your own situation

These rules come from the pages of Services Australia and from the Social Security Guide. Services Australia decides each claim on your circumstances. Thus, speak to Services Australia about your own payment.