Raising Parental Income Test (PIT) debts 107-09120040

The PIT takes into account the total combined taxable income of the dependent Youth Allowance (YA), ABSTUDY or Assistance for Isolated Children (AIC) Additional Boarding Allowance (ABA) customer's parents/guardians. This is for the base tax year (financial year ending in the previous calendar year). The 20% family taper rate applies a reduction approach to all dependent recipients within the family pool.

Customers may also be entitled to assessments based on the financial year following the base tax year, if they fit the criteria.

A change in family circumstances may result in a reassessment of the customer's entitlement. These changes are notifiable events. The types of changes that may occur are:

• the parent's/guardian's reported taxable income for the base tax year has been adjusted (for example, an amendment by the Australian Taxation Office)
• the parent's/guardian's combined taxable income for the current tax year exceeds both:
• 125% of the combined taxable income from the base tax year, and
• 125% of the Parental Income Free Area (PIFA)
• when this occurs, the customer will be assessed on the basis of this higher parental income from:
• the first pay period that includes 1 October in the current year for YA customers. If a new parental income assessment applies, it applies to the entire period of the first pay period including 1 October
• 1 October in the current year for ABSTUDY and AIC (ABA) customers
• actual income figures have become available for the base tax year (or the current tax year if used) where estimates of income were provided earlier
• the number of other dependent children in the family pool has increased or decreased
• Circumstances when the Parental Income Test (PIT) does not apply
• Changes which may affect the Parental Income Test (PIT)
• a parent has lost or gained a partner or there is a change of parent
• a reassessment may also occur if it is determined the customer provided false or misleading information about their parental income

If Services Australia is advised of a change of circumstance within the notification period, the customer's payments will be reassessed and adjusted (where necessary).

If the change is not advised within the notification period, a reassessment may result in an excess payment or a recoverable debt.

ABSTUDY and AIC (ABA) customers are required to notify a change in circumstance within 14 days. Regardless of when notification is received, the customer's entitlements are reassessed from the date the change occurred.

Youth Allowance customers

If a debt is generated for a dependent customer, staff must finalise the debt as 'no debt' where all the following circumstances are met:

• Customer's parent receives an income support payment (ISP)
• Parent's EPED is after the customer's EPED
• Parent reports their income as part of their payment obligations
• Parent's payment reduces to zero for that fortnight as a result of the report
• Customer therefore loses their exemption from the Parental Income Test
• Debt generates on the customer's record as a result of a ripple activity from the parent's record, and
• Parent’s actual income is:
• already recorded on the customer’s record, or
• verified by the customer who responds within 21 days of the agency sending a notice of request to verify their parent’s actual income

These debts are not legally recoverable

Note: this does not apply to ABSTUDY and AIC (ABA) customers.

Actual income figures (when an estimate was previously provided) must be notified within 21 days of the request for verification. View the request for verification issue date on the date indicated on the Household Income and Assets (NHI) screen. This allows 7 days for the Taxation Notice of Assessment (TNA) to be delivered, plus the 14 days requirement for notifying the change.

If there is a reassessment based on actual income figures and the actual income is higher than the estimated income, there is currently no legislation allowing the excess payments of Youth Allowance to be recovered unless the customer:

• misrepresented their circumstances, or
• fails to supply verification of parental income within 21 days from the date requested if the parents actually had confirmation from the Australian Taxation Office (ATO) at the date they said they expected to receive it. Do not raise a debt before 21 days has passed

Section 45 of the Social Security (Administration) Act 1999 provides that instalments of YA:

• for dependent persons under 18 years of age
• be paid to a parent on behalf of the person

The person (not the parent) is the legal recipient of the YA. This means that liability for any debt arising from a loss of entitlement belongs to the person. This also applies where monies have been misdirected away from the young person. This approach is consistent with the operation of section 1223(1) of the Social Security Act 1991.