Applying, assessing and coding parental income for Assistance for Isolated Children (AIC) 108-02010030

The Parental Income Test (PIT) is used to calculate entitlement to Additional Boarding Allowance (ABA).

In most circumstances, the PIT is assessed using actual parental income figures, however in some situations a reasonable estimate of parental income may be accepted.

For more details see Parental Income Test (PIT).

The PIT applies to the AIC applicant and their partner (if applicable). This includes in shared custody situations.

Any parental income above the threshold, 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 are in receipt of:

• Youth Allowance (YA)
• ABSTUDY Living Allowance
• ABSTUDY Group 2 School Fees Allowance (means tested component), or
• AIC Additional Boarding Allowance (ABA), or
• A sibling who meets the definition of an Family Tax Benefit (FTB) child or regular care child and aged 0-15 or 16-19 years and in full-time secondary study is also to be included in the family pool. See References page for Family Assistance Guide definitions of FTB child and Regular Care Child

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
• AIC Additional Boarding Allowance (ABA), or
• Meet the definition Family Tax Benefit (FTB) child or regular care child

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

The family taper of 20% is then applied to the child's share of the parental income above the threshold. This means that the rate of payment is reduced by the child's share of 20 cents for each dollar of their parents' affecting income.

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.

The PIT will not apply for an AIC Additional Boarding Allowance (ABA) student during certain periods where an exemption is applied. For more information, see Circumstances when the Parental Income Test (PIT) does not apply.

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.

A reasonable estimate of parental income can be used to apply the PIT where the:

• parent(s)/guardian(s) do not have taxable income that is assessed by the Australian Taxation Office (ATO), or
• actual income for the relevant financial year is not known by the parent(s)/guardian(s)

These situations may occur when a:

• parent/guardian has been given an extension by the ATO to lodge their tax return, or
• parent/guardian has lodged their income tax return and the ATO is yet to finalise the income tax assessment, or
• current tax year assessment is in place

If an estimate of parental income is to be considered, one of the following are required to support the estimate:

• A copy of the person's tax return, or
• A letter from a registered accountant or tax agent confirming that the person’s income for the 20xx–xx tax year:
  • is expected to be $xxxx, or
  • is not expected to be more than $xxxx, or
• If the person received an Australian Government taxable pension, benefit or allowance for the whole tax year, a statement from the department or agency that paid it, or
• Payment summaries or benefit statements, together with:
  • a statutory declaration, or
  • confirmation from an accountant stating these documents show the person's total taxable income for the tax year

ABA debts or arrears payments should not be raised or issued where:

• a reasonable income estimate has been accepted, and
• ABA payment(s) have been made, and
• no income verification is received, or
• income is verified and an overpayment or arrears payment is identified

Rather, ABA should be ceased from 1 April or the correct forward ABA rate is applied.

AIC debts are the responsibility of the applicant.