Assessing income for Farm Household Allowance (FHA) 002-20102102

The income test for FHA is linked to the allowance income test for Social Security payments such as JobSeeker Payment (JSP). However, from 11 June 2020 the rate of FHA is set under the Farm Household Support Act. Resources has a link to information about the income and assets test for FHA on the Services Australia website.

Ordinary income for FHA is assessed under Social Security Law. Key differences apply for FHA customers:

• From 11 June 2020 after the income and assets test is run and the customer's rate of FHA is payable at a rate more than zero (0) dollars, the customer must receive the maximum rate of Basic FHA for their circumstances
• A Department of Veterans' Affairs (DVA) Disability Pension is excluded from the assessment of income for FHA purposes

• Farm business income is income derived from the farm and directly related to business activities of the relevant farm enterprise
• The customer's estimate of farm business income may be used to assess eligibility to FHA for a financial year. For any FHA payments received up to 30 June 2020 (end of the 2019/20 financial year), actual farm business income was reconciled against the estimate after the end of each financial year. As a result of reconciliation, an adjustment to the customers FHA entitlement may have been calculated. Business income reconciliation does not apply to any payments received from 1 July 2020 (2020/21 financial year onwards). Processing of Business income reconciliation ended on 30 June 2024

Non-farm income is any income that is not derived from the activities of the relevant farm enterprise, or directly related farm business, this can include but not limited to:

• Employment income
• Profit from non-farm businesses
• Business income that is not derived from farm enterprise activities (such as sale of shares owned by the farm business)
• Income from financial investments (deeming)
• Foreign income
• Income from non-farming trusts and companies

Income nil rate period provisions apply to FHA as under Social Security Law.

Working Credit provisions are not applicable to FHA.

A loan to a trust or private company assessed as a farm asset is no longer considered a financial asset and is exempt from deeming rules.

Farm business income and all non-farm income is assessable under the income test.

See Rate and payment of Farm Household Allowance (FHA) to calculate a customer's daily FHA rate and income test reduction.

Lump sums received from the Emergency Water Infrastructure Rebate grants are not assessed as income. They are exempt lump sums and the associated expenses are non-allowable capital expenditure. These grants are known by different names in various states, including Emergency Water Infrastructure Rebate (NSW and QLD), Far North Water Infrastructure Grant Scheme, Great Artesian Basin Sustainability Initiative 3IP (GASBI) and South Australian River Murray Sustainability Irrigation Industry Improvement Program (SA).

A farm business loss occurs when the amount of income from the farm enterprise and directly related farm businesses, is below zero for the financial year. From 16 December 2019, farm business losses can reduce the assessable amount of non-farm income up to the amount of $100,000. 'Allowable reduction' is the amount of farm business losses that can reduce the assessable amount of non-farm income.

Any customer that has a farm business loss recorded will automatically have the farm business losses rules applied. Customers do not need to apply for an allowable reduction. If a farm business loss is recorded, the customer's allowable reduction will exclude a daily amount of non-farm income from the rate calculation. This is up to the customer's maximum amount in the financial year.

The maximum allowable reduction for a financial year is the lower of the:

• threshold of $100,000
• farm business loss for the financial year, or
• non-farm income amount earned for the financial year

For partnered customers the $100,000 reduction threshold applied to both the customer and their partner combined (that is, the threshold for a couple is $100,000 between them, not $100,000 each).

If the farmer and their partner are both in receipt of FHA, they can both claim a portion of the reduction, but the total reduction cannot exceed the maximum allowable. Customers can request to change the apportionment at any time. There is no limit on the number of times the apportionment can be changed.

Note: a person's allowable reduction is applied across the entire financial year.

During the financial year, the farm business income estimate can be used to determine the allowable reduction for that year. If the customer advises of a change of circumstances, the farm business income estimate must be updated.

Customers who operate more than one farm business and have a combined net farm business loss will be able to reduce their non-farm income.

An allowance reduction can only be applied where the total net farm businesses are running at a loss.

Note: there is a difference between the terms 'farm enterprise' and farm business'. The Farm Household Support Act, 2014 defines a 'farm enterprise' to mean an enterprise carried on within any of the agricultural, horticultural, pastoral, apicultural or aquacultural industries. The term farm business refers to a business that is operating in one of the industries mentioned above.

There may be more than one farm business in a farm enterprise. For example, a person may have 3 businesses (farms), located next to each other that share equipment. Together they are a farm enterprise, but separately, they are 3 farm businesses. Two or more farm businesses, depending on how related they are, may be the same farm enterprise or multiple, separate farm enterprises. Farm business includes related farm businesses such as agistment or contracting.

All losses for farm businesses are:

• combined to get a single total loss figure that can be offset, and
• up to a maximum of $100,000 per single or couple as per the maximum allowable reduction

After each financial year when the customer has completed their income tax return they will be required to provide this information for all farm businesses. The new information will be used to review their entitlement and ongoing eligibility for FHA.

A customer's eligibility for the offset of a farm business losses must be checked when a change of circumstance occurs, for example when the customer:

• advises changes in non-farm income
• changes their business income estimate. This may indicate the farm business is now making a loss for the financial year, or is no longer making a loss

When any change in circumstances is reported or identified.

• combine all farm business(es), and directly related business net income
• determine the total farm business income
• if the total is a loss, it can be used to reduce the assessable amount on non-farm income up to the maximum allowable reduction

If eligibility criteria is met:

• review their income and apply the new rules from the relevant date, and
• if the customer and their partner both receive FHA, and both have non-farm income, they may change the portion of the allowable reduction each person claims

Farm enterprises and/or businesses may include trust or company structures. These may run independently or in conjunction with other business structures. Trust and company cases are referred to a Complex Assessment Officer (CAO) for assessment.

Controllers of trusts and companies will be assessed based on their income and assets, including those held by the trust or company. Controllers can provide an estimate of their business income for FHA.

Non-controllers may qualify for FHA but will not be able to estimate the trust or company business income. Non-controllers are assessed on distribution income, see Assessing and recording distribution income.

A loan from the beneficiary of a trust to that trust, or from a shareholder of a company to that company, is exempt from deeming rules if all the following apply:

• the loan was used to purchase farm or farm business assets owned by the trustee of the trust or company
• the underlying assets of the entity are illiquid in nature. That is, the liquid assets held by the entity are not sufficient to repay the loan
• the beneficiary loan value does not exceed the original cost of the asset

Note: if a beneficiary loan has been assessed as a farm asset and not a financial asset, it should not be deemed.

Apply the FHA income test to all customers when:

• assessing new claims, and
• a reassessment of their income occurs

BIR did not apply to payments received from 1 July 2020 onwards. BIR processing ended on 30 June 2024.

Money received on or after 1 July 2019 from the forced disposal of livestock is not considered income for FHA if the money has, or will be deposited into a Farm Management Deposit (FMD). This exemption does not apply to other income support payments.

The amount deposited or intending to be deposited will not be assessed as income. This lets customers choose the amount they want to deposit. However, only this amount is exempt. Any money from the sale deposited in another kind of account or kept as cash is assessed as farm business income for FHA.

The gross or net amount can be exempted if the customer is deducting business expenses.

The amount deposited or to be deposited in the FMD is an assessable asset and deeming rules apply.

The exemption applies to money received in the relevant financial year and only for that year.

Customers will need to have or open an FMD account in their name, not held jointly with their business partner. Customers can find more information about FMDs and the conditions on the Department of Agriculture, Fisheries and Forestry website or by talking to their bank, Rural Financial Counsellor or accountant.

Forced disposal of livestock income from an entity (company, trust or partnership) may be exempted. The exemption only applies when the money is or will be deposited into the FMD owned by the person who has a membership interest in the entity.

It is expected customers deposit the money into the FMD within 42 days of receiving it:

• Services Australia will not actively seek confirmation from customers about the deposit into the FMD
• Customers are not required to provide evidence of the amount received or the deposit being made into the FMD
• If a customer has not told the agency about the forced sale of livestock at the time of the sale, and the agency finds the money during farm business income reconciliation, an exemption will still be provided for the relevant financial year if all other conditions are met

After a forced disposal of livestock, each business partner can choose to deposit their share of the sale into their own FMD. If one of them deposits 100% of the money received into their own FMD, only that person will have the funds exempt from the income test. Whereas, if each business partner deposits 50% of the funds into their own FMD the amount each person deposits or intends to deposit will be exempt from the income test.

If the customer voluntarily advises the amount was not deposited into the FMD, the exemption is removed for the entire financial year. Update the farm business income estimate. The customer may have a debt when the farm business income reconciliation is completed.

The customer's farm business income estimate is updated to ensure it does not include the money going to the FMD. Customers can update their estimate at any time when they become aware their farm business income is going to change.

If a customer withdraws the money from the FMD in the financial year received, the exemption does not stop. This is because the exemption is not determined by the length of time the money is in the FMD. The amount held on withdrawal in other accounts or in cash, is included in the assessment of assets and deemed.

Income from deeming of the amount in the FMD is non-farm income and therefore can be included in the FHA farm business losses.

From 1 October 2016, PPL and DAP are treated as ordinary income (non-farm) for calculating the rate of payment for FHA.

Note: from 11 June 2020 where an FHA customer is still entitled to $1 of entitlement under the income test they will be entitled to full rate of FHA during their PPL/DAP entitlement periods.

If FHA customers have no employment income they are required to report every 6 weeks. Customers are still required to notify within 14 days of changes in their circumstances that can affect their FHA payments.

If the customer or their partner receives employment income from their employer, they must report every 2 weeks.

Customers can report on their Entitlement Period End Date (EPED) via:

• phone self service
• Centrelink online account
• Farmer Assistance hotline

Genuine attempts must be made to transition customers to report via self service options before assisted reporting is completed, unless an Exception applies.

To record employment income, see Recording and correcting employment income details.

For FHA, reviews and appeals are the same as for social security payments.

If the customer requests an explanation of a decision to reject/cancel FHA due to the value of their farm assets, non-farm assets, or due to income assessment. See Request for an explanation, quality check or review (CLK).

Customers can view information about farm business losses on the Department of Agriculture, Fisheries and Forestry website.

Customers can also contact the Farmer Assistance hotline, or speak to their Financial Adviser or Rural Financial Counsellor.

The Resources page contains a link to the Department of Agriculture, Fisheries and Forestry website, contact details, customer scenarios, document templates, off farm income, offset for processing claims submitted before 16 December 2019 and FAQs.