Applying the Parental Income Test (PIT) for ABSTUDY and Youth Allowance (YA) 108-02010020

Dependent customers who are subject to the Parental Means Test and the personal income test have their fortnightly rate of payment determined by the test that results in the greatest rate reduction each fortnight.

Note: some ABSTUDY and YA customers may be exempt from the application of the PIT.

The parent(s)/guardian(s) identified for PIT depend on various factors, such as whether the customer:

• normally lives with their natural, adoptive, step or relationship parent(s)
• for ABSTUDY purposes, has a parent under traditional Aboriginal or Torres Strait Islander adoption
• does not normally live with their parent(s) and is wholly/substantially dependent on someone other than a parent
• has parents who are divorced or separated

For Away from Home rate assessments, the parent used to assess the away from home rate must be the same parent being assessed for the PIT.

Note: in shared custody situations (including parents separated under the same roof), a dependent ABSTUDY or YA customer nominates the parent with primary care responsibility. In 50/50 shared care situations the customer may nominate which parent they want assessed for the PIT.

For YA and ABSTUDY purposes, a step-parent is the married or de facto partner of the parent who has primary care and responsibility of the dependent customer.

The income of the step-parent is included in the PIT where:

• the step-parent lives with the parent, and
• the customer normally lives with the parent and step-parent

The customer is considered to be normally living with the parent/step-parent where the customer's primary home address is the same as the parent/step-parent. This may include customers who temporarily live away from home.

If a customer has established a permanent and separate home away from the parent(s)/guardian(s), and they return to the parental home to live, they must notify Services Australia.

Any parental income above the Parental Income Free Area (PIFA), is divided among the children within the family pool. The share of the parental income for each child will depend on the maximum amount of the payments for which that particular child is eligible. The total amount of payments for all dependent children contribute to the family pool maximum rate.

A sibling is included in the family pool if they:

• receive YA
• receive ABSTUDY Living Allowance
• receive Assistance for Isolated Children (AIC) Additional Boarding Allowance (ABA), or
• meet the definition of a Family Tax Benefit (FTB) child or regular care child and aged 0 - 15 or 16-19 and in full-time secondary study

The contribution to the family pool of the FTB and regular care child/ren is the maximum notional FTB rate (as applied to Youth Payments only).

When calculating the rate payable, the system may include FTB notional rate from the claim lodgement date until the day before claim assessment date where:

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

This may result in a:

• grant at one rate, then rate reduction from date claim is processed, or
• grant at reduced rate, then CAN PIH from date the claim is processed

In these cases, staff do not need to make any adjustments to the arrears or change the claim result as this is the expected outcome.

Both amounts will be included in the family pool calculation if a child receives:

• AIC ABA, or
• ABSTUDY Living Allowance and/or School Fee Allowance Group 2, and
  • is approved to live away from home
  • attends secondary boarding school, and
  • meets the definition of an FTB child or regular care child simultaneously

The contribution to the family pool of the YA child is their Maximum Payment Rate.

The Family Pool Summary (NSFP) screen shows the current and historical maximum payment rate contribution of the customer, and their linked siblings.

If the parental income reduction is less than the Maintenance Income Test Reducible Amount (MRA) and maintenance income is received in respect of the customer, the Maintenance Income Test is calculated. For more information, see Maintenance Income Test (MIT) for ABSTUDY and Youth Allowance (YA).

If the parental income reduction is equal to or more than the Maintenance Income Test Reducible Amount (MRA), the family taper of 20% is then applied to the customer's share of the parental income above the threshold. This means that the rate of payment is reduced by 20 cents for each dollar of the customer's share of their parents' affecting income.

Current at zero rate

YA customers whose payment is current at zero rate are treated as receiving payment for the family group for a maximum of 12 consecutive fortnights, after which YA will cancel.

ABSTUDY customers whose payment is current at zero rate are treated as receiving payment for the family group. ABSTUDY customers who do not receive Living Allowance will show on the Family Pool Summary (NSFP) screen as 'other'. These siblings will have a zero contribution to the family pool.

Note: YA or ABY customers are not considered to be current at zero rate if they are receiving at least $1 of payment, including Rent Assistance or Youth Disability Supplement.

Income assessed under the PIT is combined parental income in the appropriate tax year. This will usually be the base tax year but can in some cases be the current tax year.

The PIT includes the following income:

• Taxable income
• Adjusted employer provided reportable fringe benefits including salary sacrifice. The reportable fringe benefit amount as recorded on a customer's group certificate should be advised and recorded:
  • exempt reportable fringe benefits is automatically converted to the lower adjusted amount using the fringe benefits tax rate
  • other reportable fringe benefits will not be converted. 100% will be included in parental income
• Target foreign income (except if received as a gift from an immediate family member) - also known as overseas income
• Total net investment losses
• Reportable superannuation contributions
• Tax free pensions and benefits

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

Note: maintenance income received on behalf of the customer may need to be recorded separately to be assessed in the Maintenance Income Test.

Parent(s)/guardian(s) who reside outside of Australia are still required to supply combined parental income. If evidence of foreign income is provided, and does not align with an Australian tax year (1 July to 30 June) Parent(s)/guardian(s) must supply additional evidence, such as:

• letter from their employer
• payslips
• a Commonwealth of Australia Statutory Declaration

Note: if the parent/s have received income from overseas, the income should be provided for the Australian financial year period and declared in the foreign currency. Services Australia will convert the figures to Australian Dollars (AUD).

Letters from employers or payslips can be accepted in a language other than English and then referred for translation. See Translation of documents.

An exemption from the PIT applies during any period where at least one of the parent(s)/guardian(s) receive a certain social security benefit or pension, ABSTUDY Living Allowance or DVA payment.

An additional exemption applies to dependent ABSTUDY customers if a parent/guardian holds a current Health Care Card (HCC), including an HCC issued because they receive the maximum rate of Family Tax Benefit Part A.

For YA, an exemption from the PIT does not apply for any period where the customer's parent is:

• receiving an income support payment, and:
  • is serving an Income Maintenance Period that reduces their rate to zero
  • is in an employment income nil rate period, or
  • has an AGE/CZR PLS status, indicating receipt of their entire payment as a Home Equity Access Scheme (HEAS)

For ABSTUDY, an exemption does not apply:

• for a period after the expiry date on the Health Care Card (HCC)
• if a parent holds a HCC because they receive a social security Mobility Allowance (MOB) or Carer Allowance (CA) (in respect of a disabled child)
• if the applicant or the applicant's partner is not receiving an income support payment and holds only a Pensioner Concession Card (PCC) or a Commonwealth Seniors Health Card (CSHC)
• if a parent only holds a Low Income Health Care Card (LIC) (only for ABSTUDY Living Allowance customers), or
• for any period where the customer's parent is receiving an income support payment, and
  • is in an employment income nil rate period, or
  • is serving an Income Maintenance Period