Effect of income support entitlement on Family Tax Benefit (FTB) 007-07070010

Single ISP customers are exempt from the income test for:

• FTB Part A instalments unless:
• they are in an employment income nil rate period from 1 July 2018. They are required to provide an income estimate within 21 days of the request to provide an estimate, or their FTB will cancel off income support (CAN-OIS)
• their pension status is current zero rate (CZR) for reason PLS from 1 July 2019
• FTB Part B. Exempt customers who are not receiving CCS do not need to provide an estimate of their income. They may wish to provide one however, to reduce the risk of being overpaid the FTB A supplement during bulk reconciliation

Customers affected by mandatory continuous adjustment of FTB may wish to provide an estimate in order to recalculate any amount withheld due to the continuous adjustment. If they do provide a new estimate, Service Officers must ensure the estimate is reasonable before recording it.

Single ISP customers are subject to the Part A supplement income limit. Customers who anticipate they will have income exceeding the Part A supplement income limit may wish to provide an estimate to reduce the risk of being overpaid the FTB Part A supplement during bulk reconciliation.

FTB Part A should be paid at the maximum rate automatically from the later of the date the ISP started and the date entitled to FTB Part A.

FTB customers receiving an ISP are not exempt from:

• Maintenance Action Test or the Maintenance Income Test, or
• FTB Part A supplement income test
• Child Care Subsidy income test

However, if the customer (or their partner) is permanently blind and receiving Age Pension, Disability Support Pension, or a service pension or income support supplement under the Veterans' Entitlement Act 1986:

• maintenance action is not required
• maintenance income is not assessed under the Maintenance Income Test

Customers receiving other Commonwealth payments at a higher rate because they care for a child (such as child add on payments from DVA) will be limited to the base child FTB Part A rate for that child. See the Legislation links on the References page.

Partnered ISP customers are exempt from the income test for FTB Part A unless the following conditions apply:

• both members of the couple start or are in an employment income nil rate period (from 1 July 2018)
• one member of the couple is receiving an ISP and they start or are in an employment income nil rate period (from 1 July 2018)
• both members of the couple pension status is zero rate (CZR) for reason PLS (from 1 July 2019)
• one member of the couple is receiving an ISP and their pension status is zero rate (CZR) for reason PLS (from 1 July 2019)

These customers are issued a request for an income estimate and are required to provide it within 21 days of the request, or their FTB will cancel (CAN-OIS).

If both members of a couple are in receipt of an ISP and only one is in an employment income nil rate period or zero rate (CZR) for reason PLS, they will continue to be exempt from the FTB Part A income test.

The FTB Part B income test applies to all partnered ISP customers eligible to receive FTB Part B. The Part B primary earner income limit does not apply if they or their partner receives an ISP. For partnered ISP customers, the rate of Part B is reduced if the lower earner's income is above the income free area.

Partnered customers will need to provide an income estimate that includes taxable ISP and tax free pension/ benefit amounts they and their partner will receive over the full financial year, as well as employment income and any other components of adjusted taxable income (ATI) (received or expected) for the financial year for both members of the couple.

FTB customers receiving an ISP are not exempt from:

• Maintenance Action Test or the Maintenance Income Test, or
• FTB Part A supplement income test
• Child Care Subsidy income test

However, if the customer (or their partner) is permanently blind and receiving Age Pension, Disability Support Pension, or a service pension or income support supplement under the Veterans' Entitlement Act 1986:

• maintenance action is not required
• maintenance income is not assessed under the Maintenance Income Test

Customers receiving other Commonwealth payments at a higher rate because they care for a child (such as child add on payments from DVA) will be limited to the base child FTB Part A rate for that child. See the Legislation links on the References page.

If the customer is also claiming FTB, there is no requirement for FTB to be granted before their PP claim can be finalised.

Eligibility for PP must be assessed when granting a PP claim. The customer must have at least one PP child, but this does not mean that FTB must be current. It means only that the Service Officer must be sure the customer has a PP child. If proof of birth has been lodged, the scanned image can be checked if required.

If the PP claim needs to be processed before the FTB claim is finalised and the FTB claim is cancelled to allow for PP processing, the FTB claim must then be re-indexed so it can be processed appropriately.

If the customer or their partner in receipt of an ISP advises they or their partner have commenced employment and needs to update their income estimate, the Reporting Regime Details (RPRD) screen may need to be updated for ISP purposes.

When customers report their, or their partners, earnings for ISP and this results in an employment income nil rate period for ISP, the customer will:

• no longer be entitled to the income test exemption, from the start date of their ISP employment income nil rate period
• be issued a request for a family income estimate
• have a task in their online services, requesting a new family income estimate

Service Officers should discuss the FTB payment choices available to them. Choosing the right FTB payment option can help families reduce the risk of an overpayment when their payments are reconciled after the end of the financial year.

For further information on the impacts of an ISP employment income nil rate period, see Item 7.

If the person or their partner receives one of the following Department of Veterans' Affairs (DVA) payments, they are exempt from the Income Test for FTB Part A:

• Age Service Pension
• Invalidity Service Pension
• Partner Service Pension
• Carer Service Pension
• Income Support Supplement (ISS)
• Veteran Payment

If a person is receiving Defence Force Income Support Allowance (DFISA) they are also receiving a social security pension or benefit which is topped up by the DFISA amount.

The type of DVA income must be recorded on the Code Veterans Affairs Pension (DVA) screen for the system to correctly assess FTB. When details are updated, this will tag over to automatically adjust FTB.

For information about obtaining details and coding, see Payments from the Department of Veterans' Affairs (DVA) and referrals to the DVA Clearance Team.

If a customer or their partner has been granted an ISP but is serving a waiting period, including an Income Maintenance Period (SUS-IMM), they are not exempt from the FTB Part A income test.

Check if they need to revise their current income estimate and advise choices available to help reduce the chance of an overpayment during the reconciliation process. See Updating income estimates for the current financial year.

All expected income support payments for the financial year must be included as either taxable income or non-taxable pensions/ benefits.

Estimates will only be used until the last day of the waiting period. FTB Part A should automatically be assessed free of the income test from the first day the ISP is paid.

If a customer's ISP is reduced to nil due to the income test and some of that income is from their (or their partner's) employment, their ISP may remain current at an Employment nil rate period for up to 12 consecutive fortnights.

Effect on FTB Part A

From 1 July 2018, if a customer starts or is in an employment income nil rate period, the FTB Part A income test applies for the period in the following circumstances:

• they are a single ISP customer
• they are partnered, both receive an ISP and both are in an employment income nil rate period
• they are partnered and only one is receiving an ISP and is in an employment income nil rate period

The customer is required to provide an income estimate when they enter into the employment income nil rate period. A link will present on the receipt page within the Report Earnings online service. If the estimate is not provided when entering an employment income nil rate period, correspondence will be issued to request the estimate be provided. They will have 21 days from the date of the request to supply their estimate before FTB cancels off income support (CAN-OIS).

The income tested period is subject to the reconciliation process at the end of the financial year.

The Family Tax Benefit income support payment explanation (FTBISPX) screen provides information relating to whether a customer was/is on income support for the purposes of FTB.

For FTB Part A for a particular date of effect, the FTBISPX screen will display whether the customer was/is assessed as:

• in a fill-in period
• in a grace period
• in an employment income nil rate period
• exempt from the income test and if so, the reason why

Effect on FTB Part B

The FTB Part B income test applies to all partnered ISP customers eligible to receive FTB Part B. The Part B primary earner income limit does not apply if they or their partner receive an ISP. For partnered ISP customers, the rate of Part B is reduced if the lower earner's income is above the income free area.

Part B is subject to income reconciliation for:

• all partnered customers
• single customers for periods not on an ISP the primary earner income limit applies

Single ISP customers are exempt from the income test for FTB Part A and Part B instalments and do not need to provide an estimate of their income, unless in receipt of Child Care Subsidy.

The Family Tax Benefit income support payment explanation (FTBISPX) screen will display whether or not the customer and/or partner's income is/was used in the calculation of the secondary and/or primary earner income tests and the reason why. FTB Part B information contained on the FTBISPX screen includes:

• income date of event and amount
• primary and secondary earner income for FTB Part B

Reporting online for ISP and requests for Family Income Estimate

When customers use their online services to report for ISP, and it results in an ISP employment income nil rate period, the online reporting receipt page will have a direct link to update their family income estimate.

The customer must provide a family income estimate within the 21 day grace period, or FTB will cancel (CAN-OIS). Correspondence will be sent requesting a family income estimate, and an online task will display until they provide a new estimate or FTB cancels (OIS).

See Resources page for scenarios.

For more information, see:

• Employment income nil rate period
• Updating income estimates for the current financial year
• Family Tax Benefit (FTB) claim options and payment choices

When these events occur, FTB customers are sent an automatic letter requesting an income estimate for FTB (except when ISP has cancelled following a 12 fortnight period of employment income nil rate).

The letter encourages customers to provide the estimate using self service. Although a customer has 21 days to provide a new estimate before FTB cancels, they should provide an income estimate as soon as possible to reduce the chance of an overpayment.

A grace period will apply allowing FTB to continue to be paid for 21 days from the date an ISP:

• is suspended,
• is cancelled, or
• enters an employment income nil rate period

FTB will continue to be paid at the income test exempt rate (as if the ISP was current) until the customer provides a new estimate or FTB cancels. During reconciliation of FTB, the grace periods where FTB continued to be paid as though ISP was current are subject to reconciliation and will be income tested.

If an estimate is:

• provided, FTB will use the estimate from the date it is provided, the customers grace period will end and they will no longer receive the higher rate of FTB
• not provided within 21 days, the FTB will CAN-OIS

This 21 day period is subject to income reconciliation and so a delay in revising an estimate may lead to an overpayment for that period.

If FTB is cancelled (CAN-OIS) after the 21 days, it can be restored and the new combined income estimate applied from date paid to plus one day. See Restoration of Family Tax Benefit (FTB).

Unreasonable income estimates

Service Officers must ensure income estimates are recorded as accurately as possible so that a customer's entitlements are correctly assessed and the risk of overpayments reduced.

The estimate must include income support payments, employment income and any other components of adjusted taxable income (ATI) (received or expected) for the financial year for both members of the couple. If either member of the couple is receiving an ISP, the expected payments must also be included in the estimate for family assistance.

During reconciliation of FTB Part A, periods of payment that were income tested are subject to reconciliation.

The FTB Part A supplement is subject to an income test.

Customers who are subject to the bulk reconciliation process will be paid the FTB Part A supplement in bulk reconciliation if:

• Adjusted taxable income (ATI) is equal to or below the FTB Part A supplement income limit
• Immunisation requirements are met (for financial years 2012-13 to 2017-18)
• Healthy Start for School requirements are met (for financial years between 2011-12 to 2017-18)

If actual income details are later received and their adjusted taxable income is more than the FTBA Part A supplement income limit, a debt will be raised for the FTB Part A supplement for the relevant financial year. See Re-reconciliation of Family Tax Benefit (FTB).

FTB Part B is subject to income reconciliation for all partnered customers.

The Part B primary earner income limit for FTB Part B does not apply to families for any period in which a person or their partner was receiving an ISP.

The Part B primary earner income limit does apply to periods a customer is single and not receiving an ISP.

Periods subject to income reconciliation:

• employment income nil rate periods when the customer's payments were subject to the FTB Part A income test
• income support waiting periods
• periods when income support payments were suspended or cancelled are subject to income reconciliation

Incorrect ISP status in reconciliation result

If the system cannot be updated to reflect the correct income support periods (for example, change to date of retrospective ISP cancellation after review), as a last resort the FAO Income Support Override (FISPO) screen can be used to record the correct periods a customer is on or off ISP to ensure a correct reconciliation and lump sum claim result. Access is limited to staff at the APS5 level.

For more information, see Reconciliation of Family Tax Benefit (FTB).