Business income for Farm Household Allowance (FHA) 002-02050030

From 1 July 2024, unless indicated that the current financial year is different, the actual adjusted net income from the latest tax return(s) will be used for the income test. This aligns FHA with the usual approach for other income support payments to base the assessment of a business upon the most recently available tax returns and financial statements.

Farm business income updates are only required when a change in circumstances is expected to affect FHA payment eligibility. Only use an estimate of business income if the customer’s actual income is not reflective of their circumstances and the actual income results in a loss of entitlement or rejection of a claim.

Do not update the actual farm business income if the current financial year income is expected to increase and it does not change the customer’s eligibility. Encourage customers to advise when the notifiable event/change actually occurs. For example:

• when livestock sales are completed, or
• end of a crop harvest (where tonnage and prices is known)

As FHA is limited to a total period of 4 years (1,460) days in a specified 10-year period. The 4 years does not have to be taken as a single block and can be paid over multiple shorter periods. Customers may wish to consider their remaining time on payment when they are advising of increases in farm income. Rather than providing an update to their business income a customer may choose to voluntarily surrender their payment to preserve their remaining days in the current 10-year period.

It is appropriate to record an estimate when:

• a customer experiences a significant change in business income compared to the financial year their tax return was lodged, and a current year estimate will be favourable for the customer’s claim or reduce instances of nil rate periods or cancellations
• it is more appropriate to consider for partnered customers changing the proportions of the farm business loss from the generic 50/50 split rather than have the customer provide an estimated financial year income
• the customer and/or partner starts off-farm income or there is a potential for nil rate periods due to variable off-farm income

When a customer has a change in business income and it is best to remain with actual income rather than an estimate:

• where moving to a current year estimate has no potential benefit to their rate of payment
• no off-farm income or potential for nil rate periods due to variable off-farm income
• using actual income reduces the risk of overpayment. There is a risk that a current year estimate if not reviewed regularly may lead to overpayments

The Offset factor must be considered:

• when providing guidance or querying changes to a customer's circumstances
• to the percentage of offset applied to partnered couples. A change in percentage may be more appropriate than moving to a current year estimate

Customers who have had a change in circumstance that will also be favourable to their rate of payment can provide a current year estimate of business income or revise their estimate at any time during the financial year. See Table 1 > Step 2 on the Process page for options.

A change in circumstance including a change in estimate must be updated within 14 days as the change may affect the customer’s eligibility for FHA.

Services Officers must:

• have proactive conversations at every contact
• prompt customers to discuss their estimate for all farm and non-farm business when they advise of a change in circumstances. This includes receiving money from the sale of crops or livestock

Special rules apply for adjusting the farm business income estimate from a forced disposal of livestock. See Assessing income for Farm Household Allowance (FHA).

Customers can request a review of their business income estimates. The review will determine if the decision made on the information provided at the time the estimate was lodged was correct. The customer needs to reapply for FHA if they cancelled due to a correct assessment of a change in circumstances.

Customers determine the estimate by considering the known business income for the financial year to date, plus an estimate of the expected business income and expenditure for the rest of the financial year.

Total business income = all sources of directly related business income less allowable business deductions.

If a farmer has more than one business, or a single enterprise with entities, which are:

• not necessarily related (such as a farm and a petrol station), profits from one cannot be offset by losses from the other
• directly related (for example, the related farm business cannot operate without the farm enterprise), profits from one can be offset by losses from the other

Separate estimates are required for all farm businesses (including related business income) and non-farm businesses.

The customer's estimate must include:

• the value of trading stock on hand, noting that if the value at the end of the tax year is:
• greater than at the start of that tax year, the customer's profit from business must include the difference in these values
• less than at the start of that tax year, the customer's profit from business must be reduced by the difference in these values
• re-credited business deductions

Partnered customers must advise if their share of the business income has changed from the distribution percentage (their share) as shown on their latest tax returns. Where no change has been advised the Business income will continue to be applied based on the latest percentage recorded.

Refer all estimates for farmers who have a trust or company to a Complex Assessment Officer (CAO) before updating an estimate. This ensures estimates are accurate and coded within the trust or company records. See Identifying and making suitable referrals to the Complex Assessment Officer (CAO).
Note: non-controllers of a trust and/or company cannot estimate entity business income. They will be assessed on distribution income, see Assessing and recording distribution income.

For a list of items that are not allowable for FHA business income estimates, see Table 1 > Step 6 on the Process page.

Each year, customers will be asked to complete a Farm Financial Update by providing information from their most recent tax returns.

Farm Household Case Officers will request customers to complete this task when their tax returns are prepared and review the financial details provided with the customer. Updates to the business income using the actual farm business income amounts may be required where tax returns and/or financial statements are provided.