Parental Income Test (PIT) 108-02010000

The Parental Income Test (PIT) is applied to dependent ABSTUDY and Youth Allowance (YA) customers (student, Australian Apprentice or job seeker), as well as Assistance for Isolated Children (AIC) Scheme Additional Boarding Allowance (ABA) students, unless there is circumstance when the PIT does not apply.

A customer who is considered independent for Youth Allowance or ABSTUDY purposes is not subject to the PIT (however the personal/partner income tests and the combined assets test may apply).

The PIT for ABSTUDY applies to Living Allowance, the means tested component of School Fees Allowance Group 2 and certain other allowances. The amount of ABSTUDY School Fees Allowance Group 2 is also affected by the level of the student's school (tuition) and boarding fees. If the PIT precludes payment of ABSTUDY Living Allowance and associated allowances, the customer may be eligible for ABSTUDY non-means tested assistance.

For AIC ABA purposes, the amount received may also be affected by the level of the student’s school (tuition) and boarding fees.

The PIT applies to the parent(s) or guardian(s) who the customer normally lives with, or last lived with if they don't live with either parent or guardian. A step parent's income may be disregarded where the customer does not normally live with the parent and step-parent. For more information, see Applying the Parental Income Test for ABSTUDY and Youth Allowance.

The PIT for AIC ABA is applied to the parent(s) or guardian(s) of the student (usually the AIC applicant and/or their partner).

If parental income exceeds the maximum income limit (and if there is no PIT exemption), YA or ABSTUDY Living Allowance is not payable to the customer. If parental income exceeds the upper income limit for the payment of AIC ABA, the ABA is not payable to the applicant. However, the applicant is still eligible for the non-means tested AIC Basic Boarding Allowance for the student.

The system may include FTB A entitlement in the assessment of PIT for some customers from the date a YA claim is lodged until the day before the claim is processed where:

• The customer is dependent, and
• there is high parental income, and
• there are siblings in the family pool.

This may result in the rate of payment decreasing from the date the claim is processed.

Note: dependent YA customers and claimants are also subject to a personal income test. The rate of payment each fortnight will be determined by the test (on parental income or personal income) that results in the greatest reduction of rate that is payable. If this rate is nil, payment will not be made in that fortnight.

Dependent ABSTUDY students aged 16 years and over and dependent ABSTUDY Australian Apprentices aged 16 years and over are also subject to a personal income test (that is, dependent ABSTUDY students and Australian Apprentices under 16 years are exempt from the personal income test). Their payment of Living Allowance and other income tested allowances each fortnight will be determined by the test (parental income or personal income) that results in the greatest reduction of the customer or claimant’s payment. If this rate is nil, payment will not be made in that fortnight. Similarly, the amount of an ABSTUDY boarding instalment, term in advance payment of Living Allowance and other income tested allowances for students aged 16 years or over is also determined by the test that results in the greatest reduction of the payment.

Note: a Maintenance Income Test may also apply, see Maintenance Income Test (MIT) for ABSTUDY and Youth Allowance (YA).

The PIT will not apply to a dependent YA or ABSTUDY customer during the period where at least one of their parent(s)/guardian(s):

• receives a certain social security benefit or pension or a payment paid by the Department of Veterans' Affairs (DVA), listed in Module L of Section 1067G of the Social Security Act 1991 (for example, Service Pension, Income Support Supplement (ISS), Veteran Payment)
• receives ABSTUDY Living Allowance
• receives Farm Household Allowance (FHA)

The parent(s)/guardians(s) are not taken to be receiving an income support payment, and an exemption from the PIT will not apply if they:

• are serving an Income Maintenance Period that reduces their rate to nil
• are in an employment income nil rate period, or
• have an AGE/CZR PLS status (indicating receipt of Home Equity Access Scheme payments only)

Note: an additional exemption only applies to dependent ABSTUDY customers or claimants if a parent holds a current Health Care Card or has a Health Care Card because they receive the maximum rate of Family Tax Benefit Part A.

Income assessed under the Parental Income Test (PIT) is combined parental income in the appropriate tax year. This will usually be the income of the base tax year (the financial year ending in June of the previous calendar year), but can in some cases be the current tax year (the year after the base tax year.

The PIT includes the following income:

• taxable income (whether above or below the tax free threshold)
  Note: a taxation loss means the parent(s)/guardian(s) does not have a taxable income and is coded as zero
• exempt reportable fringe benefits or salary sacrifice (a fringe benefit concession is applied, depending on the relevant financial year)
• other reportable fringe benefits or salary sacrifice (100 per cent will be included to the PIT)
• target foreign income
• total net investment losses
• reportable superannuation contributions
• tax free pensions and benefits (from 1 July 2017 onward)

If a parent has paid maintenance (including child support) for other children, this amount is deducted from the total parental income amount.

If the parent/guardian is receiving compensation and they are unsure if it is taxable or not, tell them to contact the Australian Taxation Office.

From 1 July to 31 December each year, a PIT Copy process applies to parent(s)/guardian(s) who:

• received Family Tax Benefit, Child Care Benefit or Child Care Subsidy in the base tax year, and
• if single, have finalised their personal income tax returns, or
• if partnered, both parents have finalised their personal income tax returns

The parent/guardian will have their income copied to their dependent child’s record via this PIT Copy process.

This data will generally apply from 1 January of the following calendar year, or from 1 October of the current calendar year if the new income has increased to more than 125% of the previous financial year income. See Increase or decrease in parental income for Youth Allowance (YA), ABSTUDY and Assistance for Isolated Children (AIC) Scheme.

Note: a PIT Copy will not occur if the parent has any of the following recorded on their family assistance record for the appropriate tax year:

• Tax Exempt Foreign Income
• Foreign Income
• Tax Free Pension/Benefit, or
• Deductible Child Maintenance Expenditure

In September each year, all dependent YA and ABSTUDY customers, except those whose parent(s)/guardian(s) are providing a PIT exemption or have had a PIT Copy process applied to their record, are issued an annual PIT review letter and a One Time Access Code (OTAC). They are requested to have their parent(s)/guardian(s) provide the necessary information online using the Advise Parental Income online service. See Completing Parent(s)/Guardian(s) details for the Base Tax Year and Current Tax Year (MOD JY) for more information.

The PIFA is the amount of income the parent(s)/guardian(s) can have without affecting the rate of YA, ABSTUDY or AIC (ABA). If the parent(s)/guardian(s) income is above the PIFA, the YA, ABSTUDY or AIC ABA customer's or claimant’s rate is reduced.

For the Parental income free area, see:

• Parental Income Test (PIT) - Youth Allowance (YA)
• Parental Income Test (PIT) - Assistance for Isolated Children (AIC)

For the PIT, excess parental income is the amount by which the combined parental income exceeds the Parental Income Free Area (PIFA).

If combined parental income exceeds the PIFA, the excess will reduce the amount of ABSTUDY, YA or AIC ABA payable. The excess is divided amongst each member of the family pool by the percentage share of the young person’s payment of the total Maximum Payment Rate (MPR).

For example, if the total Family Pool Maximum Rate (FPMR).amount is $1,000, and there are two members of the family pool where the customer’s MPR is $600 (60% of the family MPR) and the sibling’s MPR is $400 (40% of the family MPR), then the customer’s reduction is affected by 60% of the parental income excess.

Where there is more than one dependent young person (including the customer, claimant or AIC student) in the family pool, the rate reduction is apportioned between the dependent young people. The relevant portion is based on the young person's or AIC student's percentage share of the total Family Pool Maximum Rate (FPMR).

All of the following payments will be included in the family pool where there is only one dependent young person in the family and they also receive more than one of the following payments:

• ABSTUDY Living Allowance
• Group 2 School Fees Allowance – means tested component
• Assistance for Isolated Children Additional Boarding Allowance, or
• Meet the definition of a Family Tax Benefit (FTB) child or regular care child

For example, where a child receives AIC ABA and meets the definition of a Family Tax Benefit (FTB) child or regular care child simultaneously, both amounts will be included in the family pool calculation.